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  • Feb 18, 2017, 10:41 AM
    Nominal value - inflation
    Bernie and Hilary have just married and currently live in a rent-free community in exchange for doing community chores and house repairs. They now plan to buy their own home and start a family. They aim to buy a two-bedroom flat in their local area. They have found out that flats such as these are currently on the market for 160,000. The general inflation rate is 2% a year but property-price inflation in their area is 6% a year. Both of these rates are expected to stay the same on average for the foreseeable future. The couple are confident they will be able to get a fixed interest-rate mortgage.

    • 1.2 One possibility is to build up a 20% deposit over three years. First, calculate what the 20% deposit would be now for a flat that is currently on the market for 160,000. Then use the Inflation calculator to calculate the amount (nominal value) of the deposit they would need to save up, assuming the relevant inflation rate and that similar flats would still be on sale at the end of the three years.

    I have worked out that 20% will be 32,000. However I am not sure what figures to input into the calculator below. Can someone please help me?

    Are the figures right which I have inputted. The answer is generated automatically after the figures are put in.
  • Feb 18, 2017, 07:15 PM
    You use the present value formula to calculate the value in X years time. You can approximate what the answer will be by multiplying the inflation rate by the number of years, the outcome in the calculator should be greater than this
  • Feb 19, 2017, 10:09 AM
    1 Attachment(s)
    Attachment 48711

    I have attached an image... are these figures correct in answering this question

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