The government is debating whether to spend $100 billion to reduce global warmin

Question

The government is debating whether to spend $100 billion to reduce global warming damage 100 years from now on. It is estimated that $ 800 billion of damage will be averted. A critic of the expenditure says that it would be far better to take the $100 billion, invest it in the stock market, earning an average return of 6 percent per year, and use the proceeds of the investment in 100 years to repair the damage. Should the project be undertaken?

The government is debating whether to spend $100 billion to reduce global warming damage 100 years from now on. It is estimated that $ 800 billion of damage will be averted. A critic of the expenditure says that it would be far better to take the $100 billion, invest it in the stock market, earning an average return of 6 percent per year, and use the proceeds of the investment in 100 years to repair the damage. Should the project be undertaken?

Explanation / Answer

this is compound interest calculation:

  Maturity Amount = P*(1+(R/100)) N

where n= number of years=100,R=6,P=$100 billion

i.e maturity= $33930.2 billions so you should accept the project

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