Question

Seven years ago, Lance Measy purchased a wooden statue of a Spanish Conquistador for $8,200 to put in his home office. Lance recently married a woman who he thinks has better taste then he does and she insists it has to go. He loves his new wife and agrees to sell the Conquistador statue on ebay and receives less than he paid for it, $7,000. What is his rate of return on the purchase of the statue? Hint, I/Y compounded annually

Answer 1

-2.28%

Step-by-step explanation:

we can use the future value formula:

FV = PV x (1 + r)ⁿ

$7,200 = $8,200 x (1 + r)⁷

(1 + r)⁷ = $7,000 / $8,200 = 0.853658536

⁷√(1 + r)⁷ = ⁷√0.853658536

1 + r = 0.9772

r = -0.0228 = -2.28%