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

a. $955.20

b. $2.7579 x 10¹⁷

Step-by-step 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)`