In 1895, the first Putting Green Championship was held. The winner’s prize money
ID: 2652392 • Letter: I
Question
In 1895, the first Putting Green Championship was held. The winner’s prize money was $200. In 2010, the winner’s check was $1,400,000.
What was the percentage increase per year in the winner’s check over this period? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
If the winner’s prize increases at the same rate, what will it be in 2035? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
In 1895, the first Putting Green Championship was held. The winner’s prize money was $200. In 2010, the winner’s check was $1,400,000.
Explanation / Answer
Answer
Answer 1
Future value = Present value ( 1 + r)n Where r is rate of interest and n is number of years = 115 years ( From 1895 to 2010 where 1895 is Year 0)
1,400,000 = 200 ( 1+r)115
1,400,000 / 200 = ( 1+r)115
( 1+r)115 = 7000
Now We have to assume r .
Suppose r = 8%
=(1+0.08)115
=(1.08)115
=6978.01
So r is 8.00% approx.
Answer : The winner’s check has increased approx. 8% per year over this period.
Answer 2
Future value = Present value ( 1 + r)n Where r is rate of interest and n is number of years = 115 years ( From 2010 to 2035 where 2010 is Year 0)
=1,400,000 ( 1+0.08)25
=1,400,000( 1.08)25
=1,400,000( 6.8485)
=9587865.27
Answer : Prize will be $ 9,587,865.27 in 2035