Question

Although appealing to more refined tastes, art as a collectible has not always performed so profitably. During 2003, a sculpture was sold at auction for a price of $10,320,500. Unfortunately for the previous owner, he had purchased it in 1999 at a price of $12,382,500. What was his annual rate of return on this sculpture?

Answer 1

CAGR = -4.45%

Step-by-step explanation:

Future value $10,320,500

Present value $12,382,500.

Number of years 2003 - 1999 = 4

Calculate compound annual growth rate

CAGR = (Ending value / Beginning Value) ^ (1/n) - 1

CAGR = (10,320,500/12,382,500)^(1/4) - 1

CAGR = -0.044