"Ten years ago, Tom purchased a painting for $300. The painting is now worth $1,020. Tom...
"Ten years ago, Tom purchased a painting for $300. The painting is now worth $1,020. Tom could have deposited $300 in a savings account paying 12 percent interest compounded annually. Which of these two options, in retrospect, would have provided Tom with a higher return?"
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buy the painting |
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deposit in the savings account |
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"either, both are equal financial investments" |
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"neither, being able to look at the painting is more satisfying but riskier than the savings account." |
Homework Answers
| Value of the savings account if invested 10 years ago = 300*1.12^10 = | $ 931.75 |
| The painting would fetch | $ 1,020.00 |
| Answer: Option giving higher return is | |
| *buy the painting. |
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