Problem:
Suppose the current price of gold is $659 an ounce. Hotshot Consultants advises you that gold prices will increase at an average rate of 10% for the next two years. After that the growth rate will fall to a long-run trend of 4% per year.
Required:
Question: Assume that gold prices have a beta of 0 and that the risk-free rate is 5.00%. What is the price of 1.9 million ounces of gold produced in six years?
Note: Please explain comprehensively and give step by step solution.