inflation year 1 = 5000 * (1 + 0.035)
inflation year 2 = (5000 * (1 +0.035)) * (1 + 0.052) = $5,444.10
Real value = how much your investment has either exceeded or fallen short of inflation
= 5423.61 - 5444.10 = -$20.49
This question involves a graphics calculator.
Jordan leaves $5000 in an account paying 4.15% pa compounded annually for 2 years.
Inflation runs at 3.5% pa in year 1 and 5.2% pa in year 2.
Has the real value of the $5000 increased or decreased?
The answer is: decreased by $20.49.
Can someone please tell me how i go about answering this question?
