Question

A 1987 advertisement in the New Yorker solicited offers on a 1967 Mercury Cougar XR7 (Motor Trend's 1967 car of the year) that had been stored undriven in a climate controlled environment for 20 years. If the original owner paid $4000 for this car in 1967, what price would he have to receive in 1987 to obtain a 10 percent annual return on his investment?

Answer 1

Answer:

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A 1987 advertisement in the New Yorker solicited offers on a 1967 Mercury Cougar XR7 (Motor Trend's 1967 car of the year) that had been stored undriven in a climate controlled environment for 20 years.

If the original owner paid $4000 for this car in 1967, what price would he have to receive in 1987 to obtain a 10 percent annual return on his investment?

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If the 10% is compounded yearly the price is as followed.

A(10) = 4000(1+(0.10/1))^(10*1)

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A(10) = 4000(1.1)^10

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A(10) = $10,374.97

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Cheers,

Stan H.