In 1895, the first Putting Green Championship was held. The winner?s prize money
ID: 2383230 • Letter: I
Question
In 1895, the first Putting Green Championship was held. The winner?s prize money was $220. In 2014, the winner?s check was $1,460,000. What was the percentage increase per year in the winner?s check over this period? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Increase per year % If the winner?s prize increases at the same rate, what will it be in 2041? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) Winner's prize in 2041 $Explanation / Answer
a.What was the percentage increase per year in the winner's check over this period? Rate = (Future Value/Present Value)^(1/periods) -1 Future Value $1,460,000 Present Value $220 Periods = 2014 - 1895 119 Rate = ($1,460,000/$220)^(1/119)-1 Rate 7.68% Percentage increase per year 7.68% b. Future Value = Present value (1 + rate)^periods Present Value $1,460,000 Rate 7.68% Periods = 2041 - 2014 27 Future Value =$1,460,000 x (1 + 7.68%)^27 Future value $10,752,599.84 Winner's Prize in 2041 $10,752,599.84