Solved

Adjusting for inflation

Posted on 2015-02-17
6
75 Views
Last Modified: 2015-03-08
What are the calculations necessary to adjust a particular dollar value for inflation?

E.g. I have $A in today's dollars. 35 years from now, assuming inflation is 2.5%, that will be like having $X

And the reverse:

E.g. I anticipate that my investment portfolio will have a value of $B in 35 years. Assuming 2.5% inflation, that's $Y in today's dollars

Is it just as simple as X = A * (1.025^35), and Y = B / (1.025^35) ? Or is it more complicated than that?
0
Comment
Question by:Frosty555
6 Comments
 
LVL 84

Expert Comment

by:ozo
ID: 40615580
$X=$A*(1+2.5/100)^35
$B=$Y*(1+2.5/100)^35
0
 
LVL 4

Accepted Solution

by:
Brad Rubin earned 250 total points
ID: 40615616
You should be using finance calculations for both Future Value and Net Present values. These are prepackaged calculations in Excel. You can also find them in the Finance formula sections in the formula builder.

Example:
=FV(2.5%,35,0,-$A)
=PV(2.5%,35,0,-$B)
0
 
LVL 25

Assisted Solution

by:nickg5
nickg5 earned 250 total points
ID: 40616606
Inflation the last two years has been around 1.7 to 1.8%

There are simple compound interest calculators which take less time than maybe even opening Excel.

Here is one and I made up numbers:
$30,000 savings
30 years
compounded yearly at 2.5%
After 30 years your $30,000 would be $62,927.

You can change the numbers as you like.
http://www.csgnetwork.com/interestcomplexsavcalc.html

p
0
Netscaler Common Configuration How To guides

If you use NetScaler you will want to see these guides. The NetScaler How To Guides show administrators how to get NetScaler up and configured by providing instructions for common scenarios and some not so common ones.

 
LVL 31

Author Comment

by:Frosty555
ID: 40622060
So you can treat inflation calculations the same way you would treat a compound interest calculation?
0
 
LVL 84

Expert Comment

by:ozo
ID: 40622289
Modulo whether percentage is reported as nominal APR, effective APR, APY, AER, and which index is used to measure inflation
0
 
LVL 25

Expert Comment

by:nickg5
ID: 40652913
Here is a great article on how to calculate inflation.
http://inflationdata.com/inflation/Inflation_Articles/CalculateInflation.asp

The rate of inflation that the U.S. government calculates decides the cost of living raises for retired people, etc.
Last year the rate was calculated to be 1.7%
0

Featured Post

Netscaler Common Configuration How To guides

If you use NetScaler you will want to see these guides. The NetScaler How To Guides show administrators how to get NetScaler up and configured by providing instructions for common scenarios and some not so common ones.

Question has a verified solution.

If you are experiencing a similar issue, please ask a related question

Lithium-ion batteries area cornerstone of today's portable electronic devices, and even though they are relied upon heavily, their chemistry and origin are not of common knowledge. This article is about a device on which every smartphone, laptop, an…
When you see single cell contains number and text, and you have to get any date out of it seems like cracking our heads.
The viewer will learn how to create two correlated normally distributed random variables in Excel, use a normal distribution to simulate the return on different levels of investment in each of the two funds over a period of ten years, and, create a …
This Micro Tutorial demonstrates using Microsoft Excel pivot tables, how to reverse engineer competitors' marketing strategies through backlinks.

810 members asked questions and received personalized solutions in the past 7 days.

Join the community of 500,000 technology professionals and ask your questions.

Join & Ask a Question