In the early 1980s, planners were examining alternate sites for a new London air
ID: 1096811 • Letter: I
Question
In the early 1980s, planners were examining alternate sites for a new London airport. At one potential site, the twelfth-century Norman church of St. Michaels, in the village of Stewkley, would have had to be demolished. The planners used the value of the fire insurance policy on the church-a few thousand pounds sterling-as the church?s value. An outraged antiquarian wrote to the London Times that an equally plausible computation would be to assume that the original cost of the church (estimated at 100 pounds sterling) be increased at the rate of 10% per year for 800 years. Based on his proposal, what would be the future worth of St.Michaels? (Note: There was great public objection to learning down the church , and it was spared.)Explanation / Answer
The above question applies the concept of Compound Interest.
We need to calculate the Future Value of the church. We are already provided with the:
The formula to calculate the Future Value of Compound Interest problem is: PV x (1+r)n
So, putting all the numerical values in the formula, we have the following:-
100 x (1+.10)800
Which gives us the answer as: $ 3,977,342,406,797,122,470,562,734,642,032,541,696.00