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13 April, 10:39

According to an old myth, native americans sold the island of manhattan about 400 years ago for $24. if they had invested this amount at an interest rate of 7 percent per year, approximately how much would they have had today? A) $3.6 billion B) $13.6 trillion C) $2,030 D) $10,272

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  1. 13 April, 10:52
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    option (B) $13.6 trillion

    Explanation:

    Data provided in the question:

    Time period = 400 years

    Initial amount or the Principle amount = $24

    Annual interest rate = 7%

    Now,

    Using the compounding formula, we have

    Future value = Principal * (1 + rate) ⁿ

    here, n is the time period

    thus,

    Future value = $24 * (1 + 0.07) ⁴⁰⁰

    or

    Future value = $24 * 566,906,026,887.238

    or

    Future value = 13,605,744,645,293.71

    also,

    we know 1 trillion = 10¹²

    therefore,

    we get

    Future value = $13.6 * 10¹² = $13.6 trillion

    Hence,

    The correct answer is option (B) $13.6 trillion
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