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 5% annual interest rate, what is its value as of 2018 (392 years later)? $4,128,909,870.77

Answer 1

Answer:

Today's value of Manhattan by capitalize the purchase price at 2019 will be fore 5,100,418,075.65

5.1 billions dollars

in 2018 the value of the investment was: 4,857,541,024.43

4.8 billions dollars

Explanation:

We will calculate the future value of the investment from the year of purchase until today's year 2019:

$Principal \: (1+ r)^{time} = Amount$

Principal 24.00 dollars

time 393.00  (2019 - 1626)

rate 5% = 5/100 = 0.05000

$24 \: (1+ 0.05)^{393} = Amount$

Amount 5,100,418,075.65

If we calculate for 2018:

time 392.00  (2018 - 1626)

$24 \: (1+ 0.05)^{392} = Amount$

Amount 4,857,541,024.43