©G Dear 2009 – Not to be sold/Free to use General Mathematics Preliminary Investing Money Inflation and Appreciation Stage 6 - Year 11 Press Ctrl-A ©G Dear 2009 – Not to be sold/Free to use

Inflation and Appreciation (1/3) The measure of the rate at which prices increase. Inflation Rate Inflation as a percentage. Also called the CPI. Consumer Price Index

Inflation and Appreciation (2/3) Example The cost of a vintage car is $50 000. Inflation Rate is 3% p.a. What is it’s value after 1 year? Future value = 103% x $50 000 = 1.03 x $50 000 = $51 500

Inflation and Appreciation (3/3) Example The cost of a vintage car is $50 000. Inflation Rate is 3% p.a. What is it’s value after 10 years? 10 Future value = 50 000 x (1 + 0.03) 10 = $50 000 x 1.03 = $67 195.88 Use A=P(1+r)n