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Peter Minuit and the Island Of Manhattan

© 2001 by Jon Richards

 

Peter Minuit is said to have purchased the island of Manhattan in the year 1626 for about $24 worth of beads. If instead of buying Manhattan he had put the $24 into a bank account paying 6% compound interest per year and left the money there continuously, today he would have a bank account of approximately $65 billion, ignoring income taxes. I guess we have to judge for ourselves whether Peter made a wise purchase.

 

But to carry the illustration a step further, notice how slowly Peter Minuit’s account would have grown in the first 300 years. He had not accumulated that “critical mass.” By 1925 he wouldn’t even have been a billionaire! He really would have gotten fabulously wealthy only in the past 60 years. In 1998 alone he would have made $3,522,998,645. Remember that the rate of growth of his wealth was constant throughout the period, 6% per year. It is the gain each year that accelerates under compound interest. Cool!

 

Year

Ending Balance

Gain from Previous Year

1626                    $24

$1

1675             $417

$24

1725                   $7,682   

$435

1775                         $141,509 

$8,010

1825                         $2,606,624   $147,545
1875                         $48,014,421 $2,717,797  
1925                    $884,433,035    $50,062,247
1940                            $2,119,595,236    $119,977,089
1975                    $16,291,392,953  $922,154,318
1992                     $43,869,019,586 $2,483,152,052
1993                     $46,501,160,761 $2,632,141,175
1994                    $49,291,230,407  $2,790,069,646
1995                 $52,248,704,231     $2,957,473,824
1996                    $55,383,626,485  $3,134,922,254
1997                    $58,706,644,075  $3,323,017,589
1997                    $58,706,644,075  $3,323,017,589
1998                 $62,229,042,719     $3,522,398,645
1999                   $65,962,785,282   $3,733,742,563
2001                  $69,920,552,399    $3,957,767,117

 


About the Author . . . 

Jon Richards is a licensed real estate broker, long time real estate investor and an expert in finding, appraising, buying and brokering discounted notes and mortgages. He is also the President of NoteWorthy Investments, Inc, a fifteen year old California Corporation. His company buys 7 to 10 real estate notes each month and has a portfolio of several million dollars in real estate mortgages and other cash flows. 

Jon is also the author of several excellent home study books and courses, including: 

Profits in Discounted Notes

How to Start a Profitable Note Business

Calculator Power!

More Calculator Power!

 

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