how to calculate inflation rate in excel

lets say, i want to calculation future value in 20 years with interest of 6% and inflation rate of 2%

would this formula be correct?  or is there any better way?


=500/(1+.06)^20*(1+.02)^20
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FloraAsked:
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Saurabh Singh TeotiaCommented:
I'm assuming you want to pay 500 rupee in the future .then how much money you want to make now..so inflation works other way so you have to subtract rather then add so the formula will be..

=500/((1-0.02)^20)*((1+0.06)^20)

Saurabh...
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FloraAuthor Commented:
it gives me confusing result.  the result of the above formula is 2401.96

how would you plz explain this?
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Saurabh Singh TeotiaCommented:
Okay the way formula works it calculates the inflation first..

so if you are saying 500 in future with inflation of 2% every year... it will become...

=500/(98%^20)

=748.94252

Now if you add interest which i'm assuming again that is a annual interest % paid only once...
=748.94252 * (106^20)

=2401.96

Which means that currently that much money will be equal to future 500..

Hope this helps...

Saurabh...
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Microsoft Excel

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