Spyrolaki sold his ship to Fairchild for $4 million. How much had Spyrolaki purchased the ship for five years earlier?

• A. $500,000
• B. $750,000
• C. $3,000,000
• D. $4,000,000

Answer: (B)

The main idea is cost basis and profit. Knowing only the sale price doesn’t determine what was paid originally; you need the gain or return to pin down the purchase price. If Spyrolaki sold the ship for 4 million, choosing 750,000 as the original purchase price shows a large, plausible five-year appreciation: a gain of 3.25 million. That also lets you gauge a strong positive return over five years (roughly a 39–40% annualized rate).

The other options would imply different profit levels: paying 4 million would mean zero profit, paying 3 million would yield a 1 million profit, and paying 500,000 would yield a 3.5 million profit. Without additional constraints, those would change the implied return, so selecting 750,000 best aligns with illustrating substantial but reasonable appreciation over five years.