Question

(Related to Checkpoint 5.6) (Solving for 1) Lance Murdock purchased a wooden statue of a Conquistador for $7,400 to put in his home office 9 years ago. Lance has recently married, and his home office is being converted into a sewing room. His new wife, who has far better taste than Lance, thinks the Conquistador is hideous and must go immediately. Lance decided to sell it on e-Bay and only received $4,600 for it, and so he took a loss on the investment. What was his rate of return, that is, the value of n What was Lance Murdock's rate of return, that is, the value of ?? Enter a negative percentage for a loss. 1% (Round to two decimal places.)

Answer 1

Purchase Price = $7,400
Selling Price = $4,600
Time Period = 9 years

Purchase Price * (1 + Interest Rate)^Time Period = Selling Price
$7,400 * (1 + Interest Rate)^9 = $4,600
(1 + Interest Rate)^9 = 0.621622
1 + Interest Rate = 0.9485
Interest Rate = -0.0515 or -5.15%