Answered

Although appealing to more refined tastes, art as a collectible has not always performed so profitably. During 2010, Deutscher-Menzies sold Arkie under the Shower, a painting by renowned Australian painter Brett Whiteley, at auction for a price of $1,100,000. Unfortunately for the previous owner, he had purchased it 3 years earlier at a price of $1,680,000. What was his annual rate of return on this painting? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer :

TomShelby

Answer:

the interest rate will be negative: -13.17%

Explanation:

annual rate of return:

Using the formula for future value of a lump sum and we can solve for rate:

[tex]Principal \: (1+ r)^{time} = Amount[/tex]

Principal 1,680,000

time 3 years

Amount 1,100,000

[tex]1,680,000 \: (1+ rate)^{3} = 1,100,000[/tex]

[tex](1+ rate)^{3} = 1,100,000 \div 1,680,000[/tex]

[tex]rate = \sqrt[3]{1,100,000 \div 1,680,000} - 1[/tex]

rate = -0.131650681 = -13.17%

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