According to WSJ, friends and relatives of young Warren Buffet regularly heard him complaining that he...

According to WSJ, friends and relatives of young Warren Buffet regularly heard him complaining that he did not want to spend $300,000 for his haircut. Back in the day, a haircut would cost Mr Buffet around $0.5. For how long do you need to compound the haircut price to justify Mr Buffet’s complaints? Give answers assuming that interest rate is 1%, 5%, and 10%. What if you use simple interest rate?

Expert Solution

If interest rate is 1%, number of times compounded= 1337.11

If interest rate is 5%, number of times compounded= 272.69

If interest rate is 10%, number of times compounded= 139.59

If simple interest is used,

If interest rate is 1%, number of years required= 29,999,950

If interest rate is 5%, number of years required= 5,999,990

If interest rate is 10%, number of years required= 2,999,995

Calculation as below:

jeff jeffy answered 2 years ago

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