Question

a gold mine extracted 500,000 ounces. gold is priced at present time at $460 per ounce. the mine holds gold for 3 years. if inflation (for gold) is 5.17% per year, how much money will they receive for selling in 3 years all 500,000 ounces in actual dollars

Answer 1

$267,536,000

Explanation:

Step one:

given data

total ounces=500,000

cost per ounce= $460

total amount of the ounce= 500,000*460= $230000000

Time t=3years

rate= 5.17%= 0.0517

Step two:

The inflation we have a compounding effect on the amount

$230000000

A=P(1+r)^t

A=230000000(1+0.0517)^3

A=230000000(1.0517)^3

A=230000000*1.1632

A=$267,536,000

They will receive a total of $267,536,000