Although appealing to more refined tastes, art as a collectible has not always p

Question

Although appealing to more refined tastes, art as a collectible has not always performed so profitably. During 2010, an auction house sold a painting, at auction for a price of $1,060,000. Unfortunately for the previous owner, he had purchased it three years earlier at a price of $1,640,000. What was his annual rate of return on this painting? (Negative value should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Annual rate of return %

Explanation / Answer

Formula: {[Ending Value / Beginning Value](1/number of years) – 1}

Annual Rate of Return = [($1,060,000/1,640,000)(1/3) – 1 = -0.13539 or -13.54%

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