Read the article in your Essentials text on page 111. Please comment on how the rate of return was calculated for each of the collectibles mentioned in the article. Hint: you are solving for the discount rate. Re-read pages 109-111. Then, try and use Excel's financial formulas and solve for rate. I had accumulated many shoe boxes full of baseball cards when I was younger. From approximately 1962 until about 1968, I had at least one of every Topps baseball card issued that year (as well as that fantastic bubble gum smell with each card). When I was a freshman in college, my family moved and my mother did not want to move those cards again! So, she tossed them. If I bought a Mickey Mantle card in 1963 for 25 cents, what would that card be worth today? And what would my discount rate be for the investment in that collectible?

And here is the article that this pertains to:

"It used to be that trading in collectibles such as baseball cards, art, and old toys occured mostly at auctions, swap meets, and collectible shops, all of which were limited to regional traffic. However, with the growing popularity of online auctions like eBay, trading in collectibles has expanded to an international arena. The most visable form of collectible is probably the baseball card, but Furbies, Beanie Babies, and Pokemon cards have been extremely hot collectibles in the recent past. However, its not just fad items that spark interest from collectors; virtually anything of sentimentl value from days gone by is considered collectible, and, more and more, collectibles are being viewed as investments.

Collectibles typically provide no cash flows until they are sold, and condition and buyer sentiment are the mejor determants of the value. The rates of return have been amazing at times, but care is needed in interpreting them. For example, in 2011, an 1855-S Indian Head gold $3 coin sold for $1,322,500. While that looks like a whopping price increase to the untrained eye, check for yourself the actual return on the investment was only about 8.69 percent per year. Not too bad, but nowhere near the return most people expect from looking at the sales price.

Comic books have recently grown in popularity among collectors. Spiderman, who first appeared in Amazing Fantasy No. 15, is an extremely popular superhero. The comic book sold in August 1963 at a cover price of 12 cents. In 2011, a copy of this issue had mutated to a price of $1.1 million at auction, the first Marvel Comics superhero to hit the million dollar mark. This seems like a very high return to the untrained eye, and indeed it is! Check for yourself that the return was 39.65 percent per year.

Stamp collecting is another popular activity. Possibly the most desirable stamp in the world is the Mauritius "Post Office" stamp, issued in 1847. One thousand of the stamps were originally printed, and many were used on invitationsby the wife of the Governor of Mauritius for a ball she was holding. Only 27 of the stamps were confirmed to remain in existence. In 2011, a blue two pence version of the stamp sold for 1,053,090 poinds (about $1,645,000.) Assuning two pence is equal to two cents, see for yourself that this represents an annual return of about 11.75 percent."