In this article we solve Question 3 of the compound interest quiz.

Question

Which of the following options will make more money?

Option 1: A one million dollar payment today

Option 2: A payment scheme where you start with 1 cent but the amount of money you are paid doubles every day for one month–that is, you are paid 1 cent today, 2 cents tomorrow, 4 cents the day after, and then 8 cents, and so on for the next one month (thirty days), which one would you choose?

A. One million dollars today
B. 1 cent today, 2 cents tomorrow, 4 cents the day after, and then 8 cents, and so on for the next one month
C. They will make the same amount of money
D. There isn’t enough information to tell

Solution

Answer: B.