Question

the winner of the first annual Tom Morris Golf Invitational won $130 in the competition which was held in 1904. In 2015, the winner received $1,510,000. If the winner's purse continues to increase at the same interest rate, how much will the winner receive in 2055?

Answer 1

Answer:

$44,068,955.96  

Explanation:

The annual growth rate can be determined using compound annual growth rate formula below

CAGR=(Succeeding year amount/preceding year amount)^1/n-1

n is the interval of years between the two amount which is 2015-1904=111

CAGR=(1510000/130)^(1/111)-1=8.80%

The amount the winner would receive in the year 2055 can be computed using the future value formula stated below:

FV=PV*(1+r)^n

PV is the present amount which is $1,510,000

r is the 8.80%

n=2055-2015=40 years

FV=$1,510,000*(1+8.80%)^40=$44,068,955.96