Question

In 1880 five aboriginal trackers were each promised the equivalent of 50 Australian dollars for helping to capture the notorious outlaw Ned Kelley. In 1998 the granddaughters of two of the trackers claimed that this reward had not been paid. The prime minister stated that if this was true, the government would be happy to pay the $50. However, the granddaughters also claimed that they were entitled to compound interest.

A. How much was each entitled to if the interest rate was 3%?B. How much was each entitled to if the interest rate was 6%?

Answer 1

A. $1,635

B. $48,424

Step-by-step explanation:

Using the formulae P (1+r)^t, where P= $50; the principal, r= 0.03 or 3%; the interest rate, and t= 118 (1998-1880).

Hence, at 3% each would be entitled

=50 (1+0.03)^118

=50 (1.03)^118

= $1,635

At 6% each would be entitled

= 50 (1+06)^118

= 50 (1.06)^118

= $48,424

Therefore, since the granddaughters also claimed that they were entitled to compound interest, they would be entitled $1,635 at 3% interest rate and $48,424 if the interest rate was 6%.