You are promised $1 million in 20 years. If the inflation rate averages 6 percent annually over the next 20 years, what is the real value of this $1 million in today's dollars?

Guest Sep 13, 2014

#1**+5 **### A million dollars in 20 years is equivalent to $311 804 today.

Well that would depend on how often the money is compounding but to make it easy I will say it is compounding annually.

P(1.06^20)=1000000

p=1000000/(1.06^20)

$${\frac{{\mathtt{1\,000\,000}}}{\left({{\mathtt{1.06}}}^{{\mathtt{20}}}\right)}} = {\mathtt{311\,804.726\: \!886\: \!084\: \!594\: \!591\: \!2}}$$

Melody
Sep 14, 2014

#1**+5 **

Best Answer### A million dollars in 20 years is equivalent to $311 804 today.

Well that would depend on how often the money is compounding but to make it easy I will say it is compounding annually.

P(1.06^20)=1000000

p=1000000/(1.06^20)

$${\frac{{\mathtt{1\,000\,000}}}{\left({{\mathtt{1.06}}}^{{\mathtt{20}}}\right)}} = {\mathtt{311\,804.726\: \!886\: \!084\: \!594\: \!591\: \!2}}$$

Melody
Sep 14, 2014