In: Finance
In 1904, the first Putting Green Championship was held. The winner's prize money was $130. In 2016, the winner's check was $1,167,000. (Do not round intermediate calculations.)
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 2049?
- Prize Money in 1904 = $130
Winner's check in 2016 = $1,167,000
No of years from 1904 to 2016 = 112 years
a).Calculating the Annualized percentage Increase in Price over 112 years:-
Annualized percentage Increase = (Current Prize Money/Past prize money)^(1/116=2) - 1
Annualized percentage Increase = ($1167,000/$130)^(1/112) - 1
Annualized percentage Increase = 1.084665 - 1
Annualized percentage Increase = 8.4665%
b). If the winner's prize increases at the same rate, Calculating the Prize money in 2049:-
Prize money in 2049 = Winner's check in 2016*(1+Annualized percentage Increase)^n
where, n= no of years = 2049 - 2016 = 33 years
Prize money in 2049 = $1167,000*(1+0.084665)^33
Prize money in 2049 = $1167,000*14.6135482008
Prize money in 2049 = $1,7054,010.75
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