Question

Assuming annual inflation rate of 3.5%,how much did an item that sell for $100 today cost four year ago

Answer 1

The total amount today = $100

The annual inflation rate = 3.5 %

Number of years = 4

Reduced amount = amount/(1 + inflation rate)^number of year = 100/(1 + 3.5%)^4

Reduced amount = $87.14

Required amount = amount * (1 + inflation rate)^number of years = 100 * (1 + 3.5 %)^4

Required amount = $114.75