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What happens to the future value of money when the inflation exceeds the interest rate?
it will increase
When the inflation rate is zero is the present value of one dollar is identical to the future value of one dollar?
Yes.
What happens to the future value of money when the inflation rate exceeds the interest rate?
it increases
How can you calculate the loss of real value in a 10000 savings account if inflation is 10 a year for 3 years versus the loss of real value if inflation remains around 3. How much less would that savi?
...savings account be worth if inflation goes up? (For this exercise, do not consider interest paid.)
How can I tell what the return would be on an investment?
You can use a specialized tool called a "return on investment calculator." One of these special tools can be found here: http://www.money-zine.com/Calculators/Investment-Calculators/Return-on-Investment-Calculator/ It takes the amount of the original investment, the future value of the investment, and the time elapsed into account.
More than one net present value?
The present value depends on assumptions made about interest or inflation rates for the future.
How do you adjust for inflation using the formula?
To adjust for inflation using the formula, you can use the following equation: Adjusted Value Original Value x (Current CPI / Base CPI). This formula helps account for changes in the purchasing power of money over time due to inflation.
Is there a table showing the value of a dollar in any past year relative to today?
http://www.measuringworth.com/ppowerus/ This site allows one to input the initial year, amount spent in that year and the desired year from 1774 to 2007 and receive the answer. For instance, if $1,000.00 is inputted for 1807, $18,512.68 will be the answer in 2007. It works backwards also, If $1,000.00 is inputted for 2007, $43.94 is the answer for 1907.
Do you think coins will be worth more in the future?
The value of coins in the future is uncertain and can be influenced by various factors such as economic conditions, inflation, and changes in currency systems. It is difficult to predict whether coins will be worth more in the future as their value can fluctuate over time.
If the inflation premium for a bond goes up the price of the bond?
The price of the bond decreases; the inflation premium would increase the market interest rate, which in bond valuation is located in the denominator, and the coupon payment rate is located in the numerator. When calculating the NPV of future coupon payments, as the denominator or market interest rate + inflation premium increases, the Net Present Value of future coupon payments decreases and the overall value of the bond decreases as well. The price of the bond decreases; the inflation premium would increase the market interest rate, which in bond valuation is located in the denominator, and the coupon payment rate is located in the numerator. When calculating the NPV of future coupon payments, as the denominator or market interest rate + inflation premium increases, the Net Present Value of future coupon payments decreases and the overall value of the bond decreases as well.
What will 100 be worth in 25 years?
The future value of $100 in 25 years depends on the interest rate or rate of return. For example, if you assume an average annual return of 5%, the future value would be approximately $338. However, if inflation is considered, the purchasing power of that $100 could be much lower. It’s essential to factor in both interest rates and inflation to get an accurate estimate of future worth.
Why is the concept of the time value of money important when considering bonds?
The concept of the time value of money is important when considering bonds because it helps investors understand the potential future value of their investment. By factoring in the time value of money, investors can assess the risk and return of a bond investment more accurately, taking into account factors such as inflation and interest rates over time. This allows investors to make informed decisions about whether a bond is a good investment based on its potential future value.
