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In 1880 five aboriginal trackers were each promised the equivalent of 100 Australian dollars for helping to capture the notorious outlaw Ned Kelley. In 1993 the granddaughters of two of the trackers claimed that this reward had not been paid. The Victorian prime minister stated that if this was true, the government would be happy to pay the \$100. However, the granddaughters also claimed that they were entitled to compound interest. How much was each entitled to if the interest rate was 4 percent? What if it was 8 percent?

What type of problem is this (i.e., PV, FV, etc.,? What method did you use to solve?

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#### Solution Preview

Hi there,

This is a future value problem. If in 1880, \$100 were invested at 4% compounded annually, 113 years later in 1993, that \$100 would be worth \$8,409.45

If it were invested at a rate of 8%, then that \$100 would be worth an equivalent of \$598,252.29

In order to solve the question, the future value method was chosen.

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#### Solution Summary

This is a future value problem. If in 1880, \$100 were invested at 4% compounded annually, 113 years later in 1993, that \$100 would be worth \$8,409.45

If it were invested at a rate of 8%, then that \$100 would be worth an equivalent of \$598,252.29

\$2.49