Question

in 1880 five aboriginal trackers were each promised the equivalent of 100 australian dollars for helping to capture the notorious outlaw ned kelley. in 2000 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. a. how much was each granddaughter entitled to if the interest rate was 3%? (do not round intermediate calculations. round your answer to 2 decimal places.) b. how much was each entitled to if the interest rate was 6%? (do not round intermediate calculations. round your answer to 2 decimal places.)

Answer 1

Each granddaughter entitled to 3471.10 if the interest rate was 3%, and Each granddaughter entitled to 108,818.77 if the interest rate was 6%

Part a

Calculate how much was each granddaughter entitled to if the interest rate was 3%:

Here we get the Future Value, FV,

We have, FV = PV*(1+r)^n

Where FV is future value

PV is present value

n is the period (from 1880 to 2000)

r is the interest rate

Given that, PV=100

n=2000-1880=120 years

r=3%

FV=PV*(1+r)^n

    =100*(1+0.03)^120

    =100*34.710987

    =3471.0987

FV=3471.10

Hence each granddaughter is entitled to future value of 3471.10

Part b

Calculate how much was each entitled to if the interest rate was 6%;

We have FV = PV*(1+r)^n

PV=100

n=120

r=6%

FV=100*(1.06)^120

FV=100*1088.187748

FV=108,818.7748

FV=108,818.77

Here, each is entitled to future value of 108,818.77

Learn more about future value here:

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