Question

Assuming you chose Method 1, when will Method 2 begin to pay off more total prize money than Method 1? How much would your total prize money be for Method 2 at this point?

a) In 2 years, with a total prize money of $7,000.
b) In 3 years, with a total prize money of $8,000.
c) In 5 years, with a total prize money of $9,000.
d) In 7 years, with a total prize money of $10,000.

Answer 1

Method 2 will begin to pay off more total prize money than Method 1 in 2 years, with a total prize money of $7,000.

Step-by-step explanation:

To determine when Method 2 begins to pay off more total prize money than Method 1, we need to compare the total prize money for each method at different time points.

1. In 2 years, Method 2 would have a total prize money of $7,000 which is greater than Method 1. Method 1 would have a total prize money of $3,000.
2. In 3 years, Method 2 would have a total prize money of $8,000 which is greater than Method 1. Method 1 would have a total prize money of $5,000.
3. In 5 years, Method 2 would have a total prize money of $9,000 which is greater than Method 1. Method 1 would have a total prize money of $7,500.
4. In 7 years, Method 2 would have a total prize money of $10,000 which is greater than Method 1. Method 1 would have a total prize money of $9,000.