In 2010, you make an investment that will grow to $50,000 in 2020. The CPI in 2010 is 218.1 and you guess that the CPI in 2020 will be 270.0. In 2020, approximately how much will your investment be worth in 2010 dollars?
A) $40,389
B) $50,000
C) $61,898
D) None of the above.

Question

Quizplus · Accepted Answer

We will use the inflation formula to calculate the investment in 2010 dollars.

Value in 2010 dollars = Value in 2020 dollars ÷ (CPI in 2020 ÷ CPI in 2010)

Plugging in the values, we get:

Value in 2010 dollars = $50,000 ÷ (270.0 ÷ 218.1) = $40,389.

Therefore, the answer is A) $40,389.

In 2010, You Make an Investment That Will Grow to $50,000