Question

You bought a painting 20 years ago as an investment. You originally paid $85,000 for it. If you sold it for $484,050, what was your annual compounded return on investment?

Answer 1

The annual compounded return on investment is approximately 12.6%.

Step-by-step explanation:

To calculate the annual compounded return on investment, we can use the formula:

Annual Compounded Return = (Final Value / Initial Value)^(1/n) - 1

Plugging in the values from the question:

Initial Value = $85,000

Final Value = $484,050

n = Number of years = 20

Substituting the values into the formula:

Annual Compounded Return = ($484,050 / $85,000)^(1/20) - 1

Calculating this expression, we find that the annual compounded return on investment is approximately 12.6%.