# 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
LVL 6
###### Who is Participating?

x
I wear a lot of hats...

"The solutions and answers provided on Experts Exchange have been extremely helpful to me over the last few years. I wear a lot of hats - Developer, Database Administrator, Help Desk, etc., so I know a lot of things but not a lot about one thing. Experts Exchange gives me answers from people who do know a lot about one thing, in a easy to use platform." -Todd S.

Commented:
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...
0
Author Commented:
it gives me confusing result.  the result of the above formula is 2401.96

how would you plz explain this?
0
Commented:
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...
0

Experts Exchange Solution brought to you by