The U.S. government fixed the price of gold at $35 an oz in 1934. In 2005, the price of the yellow metal was $480 an oz. Calculate the price appreciation of gold as percent per year, compounded annually.

 The U.S. government fixed the price of gold at $35 an oz in 1934. In 2005, the price of the yellow metal was $480 an oz. Calculate the price appreciation of gold as percent per year, compounded annually.

Answer

Number of years = n = 2005 - 1934 = 71 years

Present Value = 35, Future Value = 480 , rate =r=?

Here is our formula,

Future Value = Present Value x (1+r)^n

We need to put above values, we get

480 = 35 (1+r)^71

480/35 = (1+r)^71

13.71 =(1+r)^71

Now, we need to take 1/71 power both sides, we get 

(13.71)^1/71 = (1+r)^71x1/71

1.037568 = 1+r

r = 1.037568 -1 

r = 0.037568 

r = 3.757%

If we use Excel, then we find it very easily, we used rate formula in excel.