A painting cost $1,000,000 in 1981, and in 2012 it costs$5,000,000. If the average annual inflation has been 4%over this period, has the real cost of the painting gone upor down, and by how much?

I am retiring with $300,000 in my retirement account.This money is invested in a bank which promises 8%annual interest.

But I expect inflation to be 5% over the next 30 years.I want to draw an amount from my account every yearthat will give me a constant standard of living, and thatwill ensure that I run out of money in exactly 30 years.

What formula should I use to guide me in how muchto withdraw, and how much, in actual dollars, will Iwithdraw in the 25th year?

A company just invested $50,000 in a local network.Services provided by the network will bring in $15,000per year for the next five years.

The real MARR is 10%

Expected annual inflation is 3%

The value of the network, in actual dollars, depreciates by 20% every year.

Looking at the pre-tax IRR, is this a good investment?

You borrow $25,000 to buy a car, and sign a contractto pay it back in monthly installments over four yearsat an index-linked interest rate of 12%.

If the annual inflation rate is 4%, how much more do you have to pay in month 20 than you would have ifthe repayments weren’t index-linked?

You want to invest $1000 in a mutual fund thatguarantees a 5% rate of return. Inflation is expected to be 1% per year. How much will you have in youraccount in 5 years time in today’s dollars?

Placidia is experiencing an inflation rate of 10% per year,whereas its neighbour Termitia is experiencing an inflationrate of 25% per year.

The Placidian unit of currency is the placido, whereas theTermitian unit of currency is the termi. One placido iscurrently worth one termi. How many termis will a placido be worth in ten years time?

Am I better off investing in a Placidian bank that offers20% annual interest, or a Termitian bank that offers 40%annual interest?