60.1K

Verified Solution

Link Copied!

Essignment Part 1 of 4 O Points 0 of 1 Comprehensive problem Over the past few years Microsoft founder Bill Gates net worth has fluctuated between 20 billion and 130 billion In early 2006 it was about 26 billion after he reduced his stake in Microsoft from 21 percent to around 14 percent by moving billions into his charitable foundation Let s see what Bill Gates can do with his money in the following problems a Manhattan s native tribe sold Manhattan Island to Peter Minuit for 24 in 1626 Now 387 years later in 2013 Bill Gates wants to buy the island from the current natives How much would Bill have to pay for Manhattan if the current natives want a 6 percent annual return on the original 24 purchase price b Bill Gates decides to pass on Manhattan and instead plans to buy the city of Seattle Washington for 70 billion in 10 years How much would Bill have to invest today at 11 percent compounded annually in order to purchase Seattle in 10 years c Now assume Bill Gates only wants to invest half his net worth today 13 billion in order to buy Seattle for 70 billion in 10 years What annual rate of return would he have to earn in order to complete his purchase in 10 years Save d Instead of buying and running large cities Bill Gates is considering quitting the rigors of the business world and retiring to work on his golf game To fund his retirement Bill would invest his 20 billion fortune in safe investments with an expected annual rate of return of 7 percent He also wants to make 40 equal annual withdrawals from this retirement fund beginning a year from today running his retirement fund to 0 at the end of 40 years How much can his annual withdrawal be in this case GZZZD a The amount Bill would have to pay for Manhattan if the current natives wanted a 6 percent annual return on the original 24 purchase price after 387 years is billion Round to two decimal places

Answer & Explanation Solved by verified expert

See Answer