In 1895 the first sporting event was held. The winners prize money was $160. In

Question

In 1895 the first sporting event was held. The winners prize money was $160. In 2007, the winners check was $1,165,000.
(A) what was the percentage increase per year in the winners check over this period? (B) if the winners prize increases at the same rate, what will it be in 2040? In 1895 the first sporting event was held. The winners prize money was $160. In 2007, the winners check was $1,165,000.
(A) what was the percentage increase per year in the winners check over this period? (B) if the winners prize increases at the same rate, what will it be in 2040?
(A) what was the percentage increase per year in the winners check over this period? (B) if the winners prize increases at the same rate, what will it be in 2040?

Explanation / 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.

a.

1165000=160(1+r/100)^112

(1165000/160)^(1/112)=(1+r/100)

(1+r/100)=1.0826

r=(1.0826-1)*100

=8.26%(Approx).

b.

A=$1,165,000(1+8.26/100)^33

=$1,165,000*13.73951472

=$16,006,534.65(Approx).

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