In 1867, the United States bought the Alaska territory from Russia at the urging
ID: 3004731 • Letter: I
Question
In 1867, the United States bought the Alaska territory from Russia at the urging of Secretary of State William H. Seward. The Russian government needed cash and feared the territory might eventually be lost due to conflict or encroachment. The area of more than 580,000 square miles eventually became the state of Alaska in 1959. However Seward received a tremendous amount of criticism for championing and negotiating the $7.2 million purchase which was dubbed Seward’s folly by numerous detractors. In hindsight it appears the natural resource-rich region was a good buy. But how much did we pay for it in today’s dollars? ( Assume we are in 2012 today) 1. What is today’s equivalent purchase price for Alaska assuming a 3% rate of inflation?
Explanation / Answer
Number of Years Passed = 2012 - 1867= 145years
Inflation Rate = 3%
Using the formula for the compound interest
A = P(1+r)^n
=> P(1+0.03)^145
=>72.677P
=> 72.677 * 7.2 million dollars
=> 523.2751 Million dollars