Question

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 $10,605,500. Unfortunately for the previous owner, he had purchased it in 2009 at a price of $12,643,500. What was his annual rate of return on this sculpture

Answer 1

-0.028870144

Step-by-step explanation:

The computation of the annual rate of return on this sculpture is shown below:

We have to find the compound annual growth rate which is

= (Ending value ÷ Beginning value)^ (1 ÷ time period) - 1

= ($10,605,500 - $12,643,500)^ (1 ÷ 6) - 1

= -0.028870144

The six year comes from

= The Year 2015 - the year 2009

= Year 6

Basically, we applied the above formula so that the annual rate of return could come