Answer to Question #123806 in Finance for Kate

Question

In 1895, the first a sporting event was held. The winner's prize money was $110. In 2007, the winner's check was $1,168,000.



(a) What was the percentage increase per year in the winner's check over this period?



(b) If the winner's prize increases at the same rate, what will it be in 2040?

Answer 1

a) r- the percentage increase per year 

$1,168,000=110*(1+r)^{108}$

$r=0.0896=8.96\%$

b) $1,168,000*1.0896^{33}=19,843,799.73$