Better Students Ask More Questions.
what is the annual multiplier of a yearly increase of 5% due to inflation?
1 Answer | add yours
High School Teacher
If infaltion is involved, the future value of money is given by:
`F = P(1+i)^-1`
where i is the annual interest
P is the present value
So to get the multiplier,
`(1+i)^-1 = (1+0.05)^-1`
`= 20/21 = 0.9524`
Rounded to decimal places. Remember that, during inflation the value of money decreases while the value of goods increases.
Thus, the answer is `20/21 or 0.9524.`
Posted by mariloucortez on April 16, 2013 at 1:55 AM (Answer #1)
Join to answer this question
Join a community of thousands of dedicated teachers and students.