As the prize in a contest you are offered 1000 now or 1210 i

As the prize in a contest, you are offered $1000 now or $1210 in 5 years. If the money can be invested at 6% compounded annually, discuss which has the better pay out.

First we will calculate the future value of the investment for the given compound interest

Here principal amount P=$1000.

rate of interest r=6%=6/100=.06

No of years t=5

Hence the future value of the investment A=P(1+r)^t

A=1000(1+.06)⁵

A=$1338.23 >$1210

Hence the better bet is to take the prize amount instead of going for the other offer.

As the prize in a contest, you are offered $1000 now or $1210 in 5 years. If the money can be invested at 6% compounded annually, discuss which has the better p

As the prize in a contest you are offered 1000 now or 1210 i

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