Question
Although appealing to more refined tastes, art as a collectible has not always performed so profitably. During 2021, an auction house sold a painting at
Although appealing to more refined tastes, art as a collectible has not always performed so profitably. During 2021, an auction house sold a painting at auction for a price of $1,040,000. Unfortunately for the previous owner, he had purchased it three years earlier at a price of $1,620,000.
Time Line: {------------------------------------------------]
Year: 0 3
Cash: -$1,620 $1,040
What was his annual rate of return on this painting? Solve for r. (A negative value should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
We can use either the FV or the PV formula. Both will give the same answer since they are the inverse of each other. We will use the FV formula, that is:
FV = PV(1 + r)t
r = (FV/PV)1/t - 1
r = ($ _______/$______ ) 1/3 - 1
Solvefor r = __________
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started