Many people have said that buying and selling vintage cars can be very profitable. As a...

Many people have said that buying and selling vintage cars can be very profitable. As a result, you have decided to evalauate whether this is true. During 2003, a car auction house sold a vintage Spyder race car for a price of $10,401,500. The previous owner of the same car, had purchased it in 1999 from a dealer at a price of $12,557,500.

Estimate the annual rate of return for the owner of the vintage Spyder race car? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Solutions

Expert Solution

Present Value in 1999 = $10,401,500

Value in 2003 = $12,557,500

So,

12,557,500 = 10,401,500(1 + r)⁴

r = 4.82%

Annual Rate of Return = 4.82%

jeff jeffy answered 2 years ago

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