Question

Assume that in 2018, a copper penny struck at Philadelphia mint in 1796 was sold for $480,000. What was the rate of return on this investment?

Answer 1

The annual rate of return on this investment is 8.29%

Step-by-step explanation:

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

Since the copper penny is in 1795 is 1 cent

And,

1 cent = .01 dollars

Now

Year 1796 2018

Amount (in dollars) 0.01 $390,000

We know that

Future Value = Present Value × ((1 + rate )^time period)

Here,

t = 2018 - 1795 = 222

So,

.01 × ((1+rate)^(222)) = $480,000

(1+rate)^(222) = $48,000,000

1 + rate = $48,000,000^(1 ÷ 222)

1 + rate = $48,000,000^(0.004505)

1+rate = 1.082929503

rate = 0.082929503

Hence, The annual rate of return on this investment is 8.29%