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7 September, 18:43

although appealing to more refined tastes, art as a collectible has not always performed so profitably. assume that in 2015, an auction house sold a statute at auction for a price of $10,479,500. unfortunately for the previous owner, he had purchased it in 2011 at a price of $12,929,500. what was his annual rate of return on this sculpture

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  1. 7 September, 18:51
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    -5.12%

    Explanation:

    The annual rate of return can be determined using the future value formula given below:

    FV=PV * (1+r) ^n

    FV is the value of the sculpture in 2015 which is $10,479,500.

    PV is the original value of $12,929,500.

    n is the number of years the sculpture was owned which is 4 years

    r is the unknown

    10,479,500=12,929,500 * (1+r) ^4

    10,479,500/12,929,500 = (1+r) ^4

    0.810510847 = (1+r) ^4

    divide the index on both sides by 4

    (0.810510847) ^ (1/4) = 1+r

    0.948832841 = 1+r

    r=0.948832841 - 1

    r=-5.12%
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