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Future values and compound interest

Problem:

Can you please take me through this example process step by step?

Future Values

In 1880 five aboriginal trackers were each promised the equivalent of 100 Australian dollars for helping to capture the notorious outlaw Ned Kelley. In 1993 the granddaughters of two of the trackers claimed that this reward had not been paid. The Victorian prime minister stated that if this was true, the government would be happy to pay the $100. However, the granddaughters also claimed that they were entitled to compound interest. How much was each entitled to if the interest rate was 4 percent? What if it was 8 percent?

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## Q : Expected effective interest rate during the future period

Which method of payment do you recommend, assuming an expected effective interest rate of 8% during the future period?