Guest: suppose that the rate of inflation for the last four years was 3.9% per year. if a home costs 125,000 today, how much would it have cost four years ago?
You just use the compound interest formula
S = P(1+r)
n S is future value - which is 125,000 (Because the question is looking back, it wants you to work out an earlier value)
P is present value (or initial value) which is what you are trying to find.
r is the rate per compounding period. In this case the compounding period is in years. r = 0.039
n is the number of compounding periods which is 4
Try doing it yourself now.
+118654 
