The Nobel Prize is administered by The Nobel Foundation, a private institution that was founded in 1900 based on the will of Alfred Nobel, the inventor of dynamite. In part, his will stated: “The capital shall be invested by my executors in safe securities and shall constitute a fund, the interest on which shall be annually distributed in the form of prizes to those who, during the preceding year, shall have conferred the greatest benefit on mankind.” The will further stated that the prizes were to be awarded in physics, chemistry, peace, physiology or medicine, and literature. In addition to a gold medal and a diploma, each recipient receives a substantial sum of money that depends on the Foundation’s income that year. The first Nobel Prize was awarded in 1901 in the amount of $150,000. In 1996, the award was $653,000; it was $1.03 million in 2014. (a) If the increase between 1996 and 2014 was strictly due to inflation, what was the average inflation rate per year during that 18-year period? (b) If the Foundation expects to invest money with a return of 5% above the inflation rate, how much will a laureate receive in 2020, provided the inflation rate averages 3% per year between 2014 and 2020?
The Nobel Prize is administered by The Nobel
Foundation, a private institution that was founded in
1900 based on the will of Alfred Nobel, the inventor
of dynamite. In part, his will stated: “The capital
shall be invested by my executors in safe securities
and shall constitute a fund, the interest on which
shall be annually distributed in the form of prizes to
those who, during the preceding year, shall have
conferred the greatest benefit on mankind.” The will
further stated that the prizes were to be awarded in
physics, chemistry, peace, physiology or medicine,
and literature. In addition to a gold medal and a diploma,
each recipient receives a substantial sum of
money that depends on the Foundation’s income
that year. The first Nobel Prize was awarded in 1901
in the amount of $150,000. In 1996, the award was
$653,000; it was $1.03 million in 2014.
(a) If the increase between 1996 and 2014 was
strictly due to inflation, what was the average inflation
rate per year during that 18-year period? (b) If the Foundation expects to invest money with a return
of 5% above the inflation rate, how much will a
laureate receive in 2020, provided the inflation rate
averages 3% per year between 2014 and 2020?
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