Question

Although appealing to more refined tastes, art as a collectible has not always performed so profitably. During 2010, a painting was sold at auction for a price of $1,100,000. Unfortunately for the previous owner, he had purchased it three years earlier at a price of $1,680,000. What is his annual rate of return on the painting?

Answer 1

Annual rate of return is the amount you gain/lose on average each year. it is calculate as the following:

Rate of Return = (ending value - amount invested) / the number of years

OR

(1,100,000 - 1,680,000) / 3 = annual rate of return