Question

Although appealing to more refined tastes, art as a collectible has not always performed so profitably. During 2003, Sotheby’s sold the Edgar Degas bronze sculpture Petite Danseuse de Quatorze Ans at auction for a price of $10,311,500. Unfortunately for the previous owner, he had purchased it in 1999 at a price of $12,377,500. What was his annual rate of return on this sculpture?

Answer 1

Answer:-4.46%

Explanation:

Annual rate of  return=$\sqrt[Number of years]{Future value/ present value}$ - 1

=$\sqrt[4]{10,311,500/12,377,500}$ -1

=$\sqrt[4]{0.833084225409008}$ -1

=0.955371381687618-1

=-0.04462

Which can be mentioned in % as -4.46%

ARR of return on this sculpture is -4.46%