Question

The "Brasher doubloon," which was featured in the plot of the Raymond Chandler novel, The High Window, was sold at auction in 2014 for $4,582,500. The coin had a face value of $15 when it was first issued in 1787 and had been previously sold for $430,000 in 1979. a. At what annual rate of return did the coin appreciate from its minting to the 1979 sale? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What annual rate of return did the 1979 buyer earn on his purchase? (Do not round intermediate calculations and enter your answer as a percent rounded rounded to 2 decimal places, e.g., 32.16.) c. At what annual rate of return did the coin appreciate from its minting to the 2014 sale? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer 1

Answer:

a. The annual rate of return that the coin appreciate from its minting to the 1979 sale was 5.49%

b. The annual rate of return that the 1979 buyer earn on his purchase was 6.99%

c. The annual rate of return that the coin appreciate from its minting to the 2014 sale is 5.72%

Explanation:

Hi, first, let me show you the equation that we need to use in order to find the answer for all the questions.

$r=\sqrt[n]{\frac{FinalValue}{initialValue} } -1$

Where:

r = the annual rate of return

n = years from an instant to the other.

So, let´s start to solve the problems

a. n = 1979 - 1787 = 192

So, everything should look like this

$r=\sqrt[192]{\frac{430,000}{15} } -1=0.0549$

so, the answer for a is 5.49%

b. n = 2014 - 1979 = 35

So, everything should look like this

$r=\sqrt[35]{\frac{4,582,500}{430,000} } -1=0.0699$

so, the answer for b is 6.99%

c. n = 2014 - 1787 = 227

So, everything should look like this

$r=\sqrt[227]{\frac{4,582,500}{15} } -1=0.0572$

so, the answer for c is 5.72%

Best of luck.