Assignment:
Suppose the current price of gold is $650 an ounce. Hotshot consultants advises that gold prices will increase at an average rate of 12% for the next two years. After the growth rate will fall to a long-run trend of 3% per year. What is the price of 1 million ounces of gold produced in eight years? Assume that gold prices have a beta of 0 and that the risk-free rate is 5.5%.
Provide complete and step by step solution for the question and show calculations and use formulas.