Question

In 1626, Dutchman Peter Minuit purchased Manhattan Island from a local Native American tribe. Historians estimate that the price he paid for the island was about $24 worth of goods, including beads, trinkets, cloth, kettles, and axe heads. Many people find it laughable that Manhattan Island would be sold for $24, but you need to consider the future value (FV) of that price in more current times. If the $24 purchase price could have been invested at a 4% annual interest rate, what is its value as of 2012 (386 years later)?

Answer 1

Answer:

Future value of the island = $90,173,767 (Approx)

Explanation:

Given:

Present value in 1626 = $24

Annual interest rate = 4% = 4 / 100 = 0.04

Number of year (1626 - 2012) = 386 years

Future value = ?

Computation of future value:

$Future\ value = 24(1+0.04)^{386}\\\\Future\ value = 24(1.04)^{386}\\\\Future\ value = 24(3,757,240.28)\\\\Future\ value = 90,173,766.7$

Future value of the island is $90,173,766.70

Future value of the island = $90,173,767 (Approx)