Inflation Rate
- An inflation with rising prices will decrease the value of money over time
- A deflation - the opposite of inflation or negative inflation - with decreasing prices will increase the value of money over time
Inflation Rate
The future value of money after periods with uniform inflation rates can be expressed as
F = P (1 - i)n (1)
where
F = future value
P = present value
i = average inflation (or deflation) rate per period (positive for inflation, negative for deflation)
n = number of periods
Example - Inflation and Future Value
The future value of an amount of 100 after 10 periods and 4% of inflation rate can be calculated as
F = 100 (1 - 0.04)10 =
= 66.5
Future Value of Present Money due to Inflation Rate - Calculator Table
This calculated table visualizes the decrease in future value of present money due to inflation rate and time.
Download and print Inflation chart - Future Value vs. Present Value and Inflation Rate
Variable Inflation Rate
The future value of money after periods with variable inflation rates can be calculated as
F = P (1 - i1) (1 - i2)......(1 - in) (2)
where
i1..n = inflation rates of terms
The average inflation rate for all periods can be calculated as
(1 - ia)n = (1 - i1) (1 - i2)......(1 - in) (3)
or
ia = 1 - [(1 - i1) (1 - i2)......(1 - in)]1/n (3b)
where
ia = average inflation rate
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