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Homework answers / question archive / Gold cost about $100 an ounce In 1971
Gold cost about $100 an ounce In 1971. In 2007, the cost of an ounce of gold is hovering around $800. Compute the average price increase for gold.
Computation of Average Price Increase:
Given,
Cost of Gold in 1971 = PV = $100
Cost of Gold in 2007 = FV = $800
Number of years = n = 2007 - 1971 = 36
Let the rate of increase be r
FV = PV*(1+r)^n
800 = 100*(1+r)^36
r = (800/100)^(1/36) - 1 = 0.0595 or 5.95%
So, Average Price Increase for Gold is 5.95%.
