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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 $10,689,500. Unfortunately for the previous owner, he had purchased it in 2009 at a price of $12,719,500. What was his annual rate of return on this sculpture?

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saqib097

Answer:

His annual rate of return on this sculpture was -2.856%.

Explanation:

FV= PV x [tex]{(1+r)^{t}[/tex]  -----(a)

FV – amount returned,

PV - amount invested,

r – annual rate of return,

t – number of years.

t = 2015 - 2009 = 6

Re-arranging the equation (a) we get,

r = [tex](\frac{FV}{PV})^{\frac{1}{t} } -1[/tex]

r = [tex](\frac{10,689,500}{12,719,500} )^{\frac{1}{6} } -1[/tex]

r = 0.0285 or -2.856%

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