Question

Part (a)

It is said (S. Branch Walker) that the Indian who sold Manhattan for $24 was a sharp salesman. If he had put his $24 away at 6% compounded semiannually, it would now be worth over $9 billion, and he could buy most of the now-improved land back! Assume that this seller invested on January 1, 1701, the $24 he received. (Round your answers to the nearest whole dollar amount and not in millions.)

Required:

1.	Use Excel to determine the balance (in billions) of the investment as of December 31, 2015, assuming a 6% interest rate compounded semiannually. (Hint: Use the FV function in Excel.)

     

2.	Use Excel to determine the balance of the investment as of December 31, 2015, assuming an 8% annual interest rate, compounded semiannually. (Hint: Use the FV function in Excel.)

     

3.	What would be the balances for requirements 1 and 2 if interest is compounded quarterly?

     

4.	Assume that the account consisting of this investment had a balance of $9.5 billion as of December 31, 2015. How much would the total amount be on December 31, 2021, if the annual interest rate is 8%, compounded semiannually?

     

Answer 1