A famous example of future value calculations using compounding is the acquisition of Manhattan Island by Peter Minuit in 1626. Minuit, who was appointed by the Dutch West India Company Director...

A famous example of future value calculations using compounding is the acquisition of Manhattan Island by Peter Minuit in 1626. Minuit, who was appointed by the Dutch West India Company Director General of the “New Netherlands” colony on Manhattan, apparently negotiated with and acquired the entire island of Manhattan from a local Indian tribe in exchange for a bundle of goods valued 60 guilders—by some estimates the equivalent of 1.160 of today’s U.S. dollars.

a. Assuming a constant interest rate of 8% a year, what would be the 2016 value of Manhattan?

b. Do you reckon the value computed is a good approximation of the actual real estate value of Manhattan today? Why or why not?