How inflation adjustment is calculated

Prices compound just like interest does:

equivalent value = amount × (1 + i)^t

where i is the annual inflation rate and t the number of years.

Worked example. $100 at 3% inflation for 10 years: 100 × 1.03¹⁰ = $134.39. Cumulative inflation is 34.4%, not 30%, because each year's rise applies to the already-risen price.

Educational content only, not financial advice. Results are estimates for learning purposes. Consult a qualified professional before making financial decisions.