David Adams Purchased an Art Collection for $100,000 Five Years

question 105

Essay

David Adams purchased an art collection for $100,000 five years ago. He recently learned that art collections similar to his have been growing in value at an annual rate of 12% per year.
a. Determine the value of David's art collection during each of the past five years.
b. David has access to an economic consulting model that forecasts the supply and demand curves for loanable funds to be:
L_D = 18,000,000 - 100,000,000R
L_S = -4,000,000 + 120,000,000R.
The consultant believes that the supply and demand curves will remain fixed over the next two years. Assuming that David's only objective is wealth maximization, should David sell his art collection? Explain your answer in detail. (Assume that the growth rate of the art collection remains constant.)

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