10. (Related to Checkpoint 5.6) (Solving for put in his home office 9 years ago.

Question

10. (Related to Checkpoint 5.6) (Solving for put in his home office 9 years ago. Lance has recently married, and his home office is being converted into a sewing room. His new wife, who has far better taste than Lance, thinks the Conquistador is hideous and must go immediately Lance decided to sell it on e-Bay and only received $4,500 for it, and so he took a loss on the investment. What was his rate of return, that is, the value of Lance Murdock purchased a wooden statue of a Conquistador for S7200 to What was Lance Murdock's rate of return, that is, the value of i? Enter a negative percentage for a loss % (Round to two decimal places.)

Explanation / Answer

Rate of return will be = (4500/7200)^(1/9) - 1

= 0.6250^(1/9) - 1

= 0.9491 - 1

= - 0.0509

or - 5.09% (hence a loss)

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