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Holding period and annual? (investment) returns Part A : Baker Baseball? Cards, Inc
Holding period and annual? (investment) returns
Part A :
Baker Baseball? Cards, Inc. originally purchased the rookie card of? Hammerin' Hank Aaron for $33.00. After holding the card for 4 ?years, Baker Baseball Cards auctioned the card for $198.00. What are the holding period return and the simple annual return on this? investment?
Part B :
Bohenick Classic Automobiles restores and rebuilds old classic cars. The company purchased and restored a classic 1957 Thunderbird convertible 6 years ago for ?$9,500.00. Today at? auction, the car sold for ?$95,000.00. What are the holding period return and the annual return on this? investment?
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Expert Solution
1) Computation of Holding period Return and Simple Annual Return:
Holding period Return = (Ending Value - Initial Value)/Initial value
= ($198-$33)/$33
= 5 or 500%
Simple Annual Return = Holding period Return / Number of Years
= 500%/4 years
= 1.25 or 125%
2) Computation of Holding period Return and Annual Return:
Holding period Return = (Ending Value - Initial Value)/Initial value
= ($95,000-$9,500)/$9,500
= 9 or 900%
Annual Return = Holding period Return / Number of Years
= 900%/6 years
= 1.5 or 150%
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