A Certain Wine Costs $3 a Bottle to Produce

A certain wine costs $3 a bottle to produce.It improves in taste if stored properly for a period of time.When it is newly bottled, people are willing to pay only $2 a bottle to drink it.But the amount that people are willing to pay to drink a bottle of this wine will rise by $3 a year for the next 50 years.Storage costs, not including interest, are $.50 per year.If the interest rate is 5% and the wine is kept by rational investors, how old will it be when it is drunk and what will be its price at that time?

A) 50 years old and $152
B) 16 years old and $50
C) 50 years old and $153
D) 20 years old and $63
E) 4 years old and $14

Correct Answer:

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