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Math Help - Compound Interest problem..please help..

  1. #1
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    Compound Interest problem..please help..

    Hello guys..please help me on this..I've been doing this question for 3 days..ahahaha!

    A tin mine is estimated to have tin reserves worth two million dollars. If the monthly extraction is 5% of the value of the reserve the month before, find the value of the tin reserves after two years.

    I know if I use the geometric progression, I'll get the answer somewhere around 583978.05 and I guess that's the right answer but I have to use compound interest formula..I think maybe it's present value formula...but I'm totally lost..please help...
    Last edited by Misya; September 1st 2009 at 08:07 AM.
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  2. #2
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    Sounds like you're already there. With the amount remaining at the end of any month being 95% of the amount at the end of the previous month,

     2M\ \times \ (0.95)^{24} = 583,978, as you've computed. Relating that to the typical PV / FV equation, think of the 0.95 as (1 + r), where r is the -5% "growth" rate (negative growth, in this case).
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  3. #3
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    ohh...yeah..my mistakes is so small that I can fail this subject..

    I've been doing this ---> 2M x (1 + [5%/12])^-24

    I dunno what I'm doing actually..

    But millions of thanks...I really appreciate it..thank you
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