Did the Dutch Make a Good Deal?
On May 24, 1626, Peter Minuit, DirectorGeneral of the Dutch colony of New Netherland, supposedly purchased the island of Manhattan (11,000 morgens in size, or 22,000 acres) from the Canarsee Delewares. The price: 60 guilders (glass beads and trinkets), which is equivalent to $24.
Suppose that the Canarsee Delewares had invested this amount of $24 and received 8% compounded annual interest. What would their investment be worth today? Is this amount more or less than the current value of Manhatten Island?
Hint: Remember...I=PRT...but is this for compounded annual interest...or? How can you figure it out by thinking with the numbers.
Solution Commentary: Read Jeffrey Strain's thorough investigation of this problem. His interesting conclusion: "Not only would they have enough money to buy back all of Manhattan, they would still have several hundred million dollars left over."
