In 1997, a famous painting sold at auction, net fees, for $36 million. In 1889,

Question

1. In 1997, a famous painting sold at auction, net fees, for $36 million. In 1889, 108 years earlier, the same painign sold for $125. Calculate the annual rate of return on this investment. What does this suggest about the merits of find art as an investment?
2. If National HealthCare Corp. reported earnings per share of $5.82 in 1990 and $21.26 in 2001, at what annual rate did earnings per share grow over this period?
3. An investment promises to double your money in five years. What is the promised IRR on the investment?

Explanation / Answer

12.34 (using a financial calculator). Art is a good investment but very volatile (so be prepared to hang on for 108 years :)).

12.43 (using a financial calculator)

14.87 (using, guess what)

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