On May 24, 1626, Peter Minuit, Director-General 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."