Question

In 1626, Peter Minuit of the Dutch West India Company paid $24 to purchase Manhattan Island in New York. In retrospect, if Mr Minuit had invested the $24 in a savings account that earned 10% interest, how much would it be worth in 2014? Calculate using:
a. Simple interest
b. Compound interest

Answer 1

Answer:

a. $955.20

b. $2.7579 x 10¹⁷

Explanation:

a. Simple interest

The value in 2014 of the investment at a 10% simple interest rate is:

$S= \ 24 + \ 24*0.10*(2014-1626)\\S=\ 955.20$

b. Compound interest

The value in 2014 of the investment at a 10% compound interest rate is:

$C= \ 24(1.10)^{(2014-1626)}\\C=\ 2.7579*10^{17}$