Assume that in 2010, a gold dollar minted in 1893 sold for $127,000. For this to have been true, what rate of return did this coin return for the lucky numismatist? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Assume that in 2010, a gold dollar minted in 1893 sold for $127,000. For this to have been true, what rate of return did this coin return for the lucky numismatist? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

 

Rate of return

%

Explanation:

We can use either the FV or the PV formula. Both will give the same answer since they are the inverse of each other. We will use the FV formula, that is:

FV = PV(1 + r)t

Solving for r, we get:

r = (FV / PV)1 / t – 1

r = ($127,000 / $1)1/117 – 1 = 0.1057, or 10.57%

Calculator Solution:

Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the calculation.

Enter

117

$1

±$127,000

N

I/Y

PV

PMT

FV

Solve for

10.57%