How to Calculate Future Prices

 


Home Page

Contact
Biography

Current Issues
Markets

Finance
Inflating Prices
Automobiles

Investment
Investment Process

Retirement Plans
IRAs

Fiduciary Standards
Who is a Fiduciary
Standards of Care

Insurance
Life
Health
Annuities

Taxation
Estate

Personal Interests

 

One of the most important elements in financial forecasting is taking into account the effect of inflation when projecting future prices. There are two elements to consider, the mathematics and the assumed rate of inflation.

Operators (as used in spreadsheet programs):

* is multiplication
^ is exponentiation

Equation:

Future price = Current Price * ((1 + Inflation Rate) ^ Number of Years).

Generally accepted long-term rate of inflation:

3.1% per year (written in decimal form 0.031 in computations)

Example:

Price of putting a new roof on your home in 15 years. The current price for this job is $7,000.

Equation: Future price = $7,000 * ((1+0.031)^15)

Future price in 15 years = $11,065.68

*****
This Web site is not intended for distribution to, or use by, any person or entity in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.