Question

Please write the calculation step by step!

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The Dutch West India Company dispatched the first permanent settlers to Manhattan Island in 1624. In 1626, the fledgling town's governor, Peter Minuit, bought Manhattan from the Canarsie tribe for $24 worth of beads and trinkets. Locals sometimes cite this transaction as one of the last real estate bargains in New York.

• How big of a bargain was it? At 6% interest rate? At 7%?

Answer 1

Formula sheet

A	B	C	D	E	F	G	H	I
2
3		Present value of Bargain at 6% interest rate:
4
5		Purchase done in Year	1626
6		Current Year	2018
7		Number of Years	=D6-D5
8
9		Interest rate	0.06
10		Amount paid in 1626	24
11
12		Current value of the bargain	=Future value of Bargain
13			=$24*(F/P,6%,392)
14			=(D10*((1+D9)^D7))/(10^9)	Billion $	=(D10*((1+D9)^D7))/(10^9)
15
16		Hence Current value of the bargain	=D14	Billion
17
18
19		Present value of Bargain at 7% interest rate:
20
21		Purchase done in Year	1626
22		Current Year	2018
23		Number of Years	=D22-D21
24
25		Interest rate	0.07
26		Amount paid in 1626	24
27
28		Current value of the bargain	=Future value of Bargain
29			=$24*(F/P,7%,392)
30			=(D26*((1+D25)^D23))/(10^9)	Billion $	=(D26*((1+D25)^D23))/(10^9)
31
32		Hence Current value of the bargain	=D30	Billion
33