Question

Lance Murdock purchased a wooden statue of a Conquistador for $ 7 comma 200 to put in his home office 7 years ago. Lance has recently​ married, and his home office is being converted into a sewing room. His new​ wife, who has far better taste than​ Lance, thinks the Conquistador is hideous and must go immediately. Lance decided to sell it on​ e-Bay and only received ​$4 comma 700 for​ it, and so he took a loss on the investment. What was his rate of​ return, that​ is, the value of i​?

Answer 1

-5.91%

Step-by-step explanation:

The rate of return can be determined using the future value formula as shown below:

FV=PV*(1+r)^n

FV is the amount the wooden statue was sold for after it was purchased seven years which is $4700

PV is the original cost of the wooden statue

r is the unknown

n is the number of years which 7 years

4,700=7,200*(1+r)^7

divide both sides by 7,200

4700/7200=(1+r)^7

0.652777778 =(1+r)^7

divide the index on both sides by 7

(0.652777778) ^(1/7)=1+r

0.940887955 =1+r

r=0.940887955 -1

r=-0.059112045 =-5.91%