3. At an estate auction attended by more than 1,957 people, a bidding war broke out over a highly coveted collection of 175 very rare gold coins, each minted and stamped on both sides with the following: A Roman Eagle adorned with a small crown and superimposed with a French fluer de lis on its breast, [x]:175, 1957, 1 troy oz., 0.9999 pure gold, HM Royal Mint. The auction company charges 9% commission on all sales. All 1,957 people in attendance had to agree to this fee prior to participating in the auction; that is to say, the fee is considered a given and is a separate pecuniary matter from the bidding action. The auctioneer began by calling $350,000, which was quickly agreed to by one of the bidders. After 27 more exchanges of bids and counterbids, each one met by willing buyer after willing buyer, the collection eventually sold for $402,500 to a lady named Sofia. After the bid was closed, Sofia used her mobile phone to check the current price of gold on the commodities market. She then broke down in tears because of what she discovered. In terms of gold price per ounce, the price she discovered was $2,023. Steve, who had been one of the competing bidders, noticed Sofia crying and walked over to see what was troubling her. Sofia explained that she got caught up in the heat of the moment and wasn’t thinking clearly. With a wolfish grin, Steve did something unexpected: he offered to buy the entire collection from her for the same price she paid, and he even offered to pay the auctioneer’s 9% sale-price fee on top of that. Sofia viewed this as a way out of her predicament and immediately agreed. What Steve neglected to tell Sofia is that the box of gold coins had been in several estate collections over the past 70 years, including the estates of two well-known European families. A few weeks later, and completely unbeknownst to Sofia, Steve subsequently sold all 175 coins to the Royal Numismatist in London for $5,700 each, where they are now included on display with the Crown Jewels. (Estimated Response Time for Average Student: 30 minutes) In your answers to the questions below regarding the passage above, remember, if there is math involved, you must show your work; if you’re using information that is not your own, you must cite credible sources. 3a. – What was the original ask price of the collection? 3b. – What was the first discovered price per ounce during this auction? 3c. – In a few words, explain when price discovery initially took place during the auction. 3d. – How many times did price discovery take place during the auction? 3e. – Were there any occasions before or after the auction that price discovery took place? Defend your answer. 3f. – Steve could’ve very well bid Sofia out during the auction. Why do you suppose he waited until after the auction to make his attempt to buy the collection? 3g. – Given what we know about the per ounce price of gold, why do you think the Royal Numismatist, or anyone else for that matter, would be willing to pay what they did for the collection? 3h. – Defending your position, explain whether you think Steve’s actions were ethical. 3i. – In 1957, the approximate price of gold was $35.25 per ounce. Unlike dollars, gold does not earn interest. In this way, gold can be a useful benchmark for measuring inflation. Assuming Sofia’s mobile phone check regarding the open market’s current present-day price (per ounce) of gold was accurate, what is the effective inflation rate from 1957 to the present day based solely on this scenario? Put your answer to exactly two decimal places.
3. At an estate auction attended by more than 1,957 people, a bidding war broke out over a highly coveted collection of 175 very rare gold coins, each minted and stamped on both sides with the following: A Roman Eagle adorned with a small crown and superimposed with a French fluer de lis on its breast, [x]:175, 1957, 1 troy oz., 0.9999 pure gold, HM Royal Mint.
The auction company charges 9% commission on all sales. All 1,957 people in attendance had to agree to this fee prior to participating in the auction; that is to say, the fee is considered a given and is a separate pecuniary matter from the bidding action. The auctioneer began by calling $350,000, which was quickly agreed to by one of the bidders. After 27 more exchanges of bids and counterbids, each one met by willing buyer after willing buyer, the collection eventually sold for $402,500 to a lady named Sofia. After the bid was closed, Sofia used her mobile phone to check the current
Steve, who had been one of the competing bidders, noticed Sofia crying and walked over to see what was troubling her. Sofia explained that she got caught up in the heat of the moment and wasn’t thinking clearly. With a wolfish grin, Steve did something unexpected: he offered to buy the entire collection from her for the same price she paid, and he even offered to pay the auctioneer’s 9% sale-price fee on top of that. Sofia viewed this as a way out of her predicament and immediately agreed. What Steve neglected to tell Sofia is that the box of gold coins had been in several estate collections over the past 70 years, including the estates of two well-known European families. A few weeks later, and completely unbeknownst to Sofia, Steve subsequently sold all 175 coins to the Royal Numismatist in London for $5,700 each, where they are now included on display with the Crown Jewels.
(Estimated Response Time for Average Student: 30 minutes)
In your answers to the questions below regarding the passage above, remember, if there is math involved, you must show your work; if you’re using information that is not your own, you must cite credible sources.
3a. – What was the original ask price of the collection?
3b. – What was the first discovered price per ounce during this auction?
3c. – In a few words, explain when price discovery initially took place during the auction.
3d. – How many times did price discovery take place during the auction?
3e. – Were there any occasions before or after the auction that price discovery took place? Defend your answer.
3f. – Steve could’ve very well bid Sofia out during the auction. Why do you suppose he waited until after the auction to make his attempt to buy the collection?
3g. – Given what we know about the per ounce price of gold, why do you think the Royal Numismatist, or anyone else for that matter, would be willing to pay what they did for the collection?
3h. – Defending your position, explain whether you think Steve’s actions were ethical.
3i. – In 1957, the approximate price of gold was $35.25 per ounce. Unlike dollars, gold does not earn interest. In this way, gold can be a useful benchmark for measuring inflation. Assuming Sofia’s mobile phone check regarding the open market’s current present-day price (per ounce) of gold was accurate, what is the effective inflation rate from 1957 to the present day based solely on this scenario? Put your answer to exactly two decimal places.
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