Re: Inflation Calculator

From: David Hodges <dhodges@recol.com>
Subject: Re: Inflation Calculator
Date: Mon, 24 Jan 2000 16:25:26 -0500

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At 04:06 PM 1/24/00 -0500, Rich Carreiro wrote:
> >do. But they want a simple inflation calculator. The client puts in the
> >starting year, starting amount, and ending year, and the calculator shows
> >the ending amount as adjusted by inflation.
>
>What is the "ending amount"?  The problem seems underspecified.  Is this
>the question you are trying to answer: "I have $1000 today.  If I just
>stick it in my mattress, how much will that $1000 be worth in
>today's dollars 30 years from now"?

Yes, this is the question we are trying to answer, the "stick it in the 
mattress" one.

>And do you want to be able to output intermediate results (i.e. values
>after each year), or just show the final result?

I think either option should be possible....the user picks whether they 
want a year-by-year schedule or just the final result.

>First, how do you plan to use a table of past inflation data when
>going forward?  You can't just "replay" past inflation series.
>
> >       Y =  X * (1 - C)
>
>It would be
>         Y = X / (1 + C)

Okay, so given $1000 to start and an inflation rate of 2%, my formula gives 
$980 and yours gives $980.39. So I can see how over many years the errors 
would chain up.
I don't understand why your formula is better though I believe you that it 
is. As you say, my formula takes dollars away from you. But why does yours 
make the dollars worth less? (Admittedly I'm a computer programmer, not a 
mathematician).

Thanks,
David

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