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 tha t 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 4.5% annual interest rate, what is its value as of 2012 (386 years later)?

Q	$660,384,991.64
Q	$488,110,646.00
Q	$758,007,120 .84
0	$574,247,818 .82

Answer 1

A	B	C	D	E	F	G	H	I	J	K	L
2
3		Future value (FV) of amount invested today (P) at interest rate of r after n periods is given by following equation:
4		FV = P*(1+r)n
5
6		Amount Invested (P)	$24
7		Interest rate (r)	4.50%
8		Number of years (n)	386
9
10		Future value as of 2012	= P*(1+r)n
11			=$24*(1+4.5%)386
12			$574,247,818.82	=D6*((1+D7)^D8)
13
14		Hence the Future value as of 2012	$574,247,818.82
15		Thus the fourth option is correct.
16