In January of 1980, a Troy ounce of gold sold for $850 (an all-time high). Over the past 28 years, suppose the CPI has grown at a compounded annual rate of 3.2%. Today a Troy ounce of gold sells for $690.
a. In real terms, with 1980 as the reference year, what is today's price of gold per ounce in 1980 purchasing power?
b. If gold increases in value to keep pace with the CPI, how many years will it take to grow to $850 per ounce in today's purchasing power?
c. What was the real interest rate earned from 1980 to 2010 on an ounce of gold?