In 1974, Johnny Miller won 8 tournaments on the PGA tour and accumulated $353,022 in official season earnings. In 1999, Tiger Woods accumulated $6,616,585 with a similar record.

Question

(a) Suppose the monthly inflation rate from 1974 to 1999 was 0.0079. Use the compound interest formula to estimate the equivalent value of Miller's winnings in the year 1999. (Round your answer to the nearest cent.) I got the correct answer of 3741410.25

(b) Find the annual interest rate needed for Miller's winnings to be equivalent in value to Woods's winnings. (Round your answer to two decimal places.)---this is the part I'm having problems with.

Answer 1

on your equation do it this way:

futurevale= origianl valeu(1+i)^t

take the log of each side
log(future value)= log(valueorig)+ tlog(1+i)

then, solve for log(i+i), then, take the antilog and you end with something like this
1+i=10^z where z was what you found log(1+i) was equal to.

Now solve for i.