FV=PV(1+r)^n 1460000(1+7.54%)^25=8986770.67 is Wrong In 1895, the first Putting
ID: 2813643 • Letter: F
Question
FV=PV(1+r)^n
1460000(1+7.54%)^25=8986770.67 is Wrong
In 1895, the first Putting Green Championship was held. The winner's prize money was $220. In 2016, the winner's check was $1,460,000. a. What was the percentage increase per year in the winner's check over this period? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) If the winner's prize increases at the same rate, what will it be in 2041? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. 7.54 % a. Increase per year b. Winners prize in 2041Explanation / Answer
We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.
1.
1,460,000=220(1+r/100)^121
(1,460,000/220)^(1/121)=(1+r/100)
(1+r/100)=1.075440035
r=(1.075440035-1)*100
=7.54%(Approx).
b.
We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.
Hence
A=$1,460,000(1+0.075440035)^25
=1,460,000*6.161053698
which is equal to
=$8,995,138.42(Approx).
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