What Would Prema's Profit Have Been If She Sold All the Gold Holdings in 2009?
What would her profit have been if she sold all the gold holdings in 2009?
To calculate the profit, we need to determine the total cost of the gold purchased in 2005 and compare it to the total selling price in 2009. Determine the total cost of gold purchased in 2005: Prema purchased 30 ounces of gold in 2005 at a price of $430 per ounce. Therefore, the total cost of the gold holdings is calculated as follows: Total cost = 30 ounces * $430 per ounce = $12,900. Determine the selling price in 2009: Prema sold one-third of her gold holdings in 2009 at a price of $916 per ounce. Since she sold a third of her holdings, the amount sold would be: Amount sold = 1/3 * 30 ounces = 10 ounces. Therefore, the selling price in 2009 is calculated as follows: Selling price = 10 ounces * $916 per ounce = $9,160. To calculate the profit, we subtract the total cost from the selling price: Profit = Selling price - Total cost = $9,160 - $12,900 = -$3,740. In 2009, if Prema sold all her gold holdings, she would have received $9,160. However, the total cost of the gold purchased in 2005 was $12,900. Therefore, the profit would have been negative, indicating a loss of $3,740. This negative profit suggests that selling all the gold holdings in 2009 would have resulted in a loss for Prema. It implies that the selling price in 2009 was not enough to cover the initial cost of the gold. It's important to note that this calculation does not take into account any additional costs such as transaction fees or taxes that may have been incurred during the selling process.