4 ms·

How about the 73 years interest? :-)

pimmen 9y ago
With the somewhat generous annual interest of 6%, it would be around $1000. Not exactly back breaking for the DoD (or the VA, for that matter, whatever department has this issue on their table).
- foota 9y ago
  You're off by a factor of ten. Assuming monthly compounding: (1 + .06/12)^(12 * (2017-1944)) = 78.97 78.97 * 180 = 14214 However the final amount is highly sensitive to interest rate assumed, for different interest rates: .02 774.13 .04 3,321.26 .06 14,214.86 .08 60,692.55 .10 258,514.77 .12 1,098,489.57 However it's unlikely that the money would have been invested anyways.
  - thomasz 9y ago
    You are wrongly calculating with $180 instead of $13. The $180 figure is $13 adjusted by inflation.
    - Retric 9y ago
      While true using 6% during periods where inflation was > 6% is a poor interest rate. IMO, inflation +4% is reasonable.
  - ars 9y ago
    Can't include both interest and inflation. It's one or the other, not both.
    - Sumaso 9y ago
      You can certainly include both interest and inflation.
      - libeclipse 9y ago
        How so?
        LyndsySimon 9y ago
        I'm not a mathematician by any means, but I would think that (interest rate) - (rate of inflation) = (effective interest rate)
        pc86 9y ago
        No
        smallnamespace 9y ago
        You've just defined the real interest rate, as opposed to the nominal rate
        oliwarner 9y ago
        Say you put £100 in the bank 50 years ago. Compound interest tells us how much money we have. If we assume an improbably static 2% every year, today we have ~£270 in our account. Inflation doesn't work on top of that because £270 is what it's already worth today. Inflation tells us what our original £100 is worth in terms of buying power. If a loaf of bread cost £0.10 in 1967 but costs £1.50 today, we can say over 50 years there has been 150% inflation. These sorts of price index comparisons allow us to compare worth back then. Or in reverse, you can see this in very real terms. You could look at your £270 and see that would only buy you 180 loaves of bread. In 1967, your £100 would have garnered 1000 loaves. Interest has not kept up with inflation. You have lost money —in this example— by "saving" it. On a shorter timescale, RPI and CPI allow central banks to see inflation and —to a point— alter their base rates to help influence the balance of savers-vs-spenders, lessening the popular disposable cash, and lessening inflation. That's the theory, anyway.
        oliwarner 9y ago
        Though obviously I skwonked the percentage increase there. The inflation in that tiny bread example was 1400%
  - emn13 9y ago
    He might have spent the money in ways that later benefited him - even if he bought a house that was 13$ more expensive, given the housing boom during his lifetime in many locations he would have made more than a 6% return. You're never going to be able to really figure that what-if game anyhow... I think interest is an appropriate simplification (certainly more appropriate than inflation).

With the somewhat generous annual interest of 6%, it would be around $1000. Not exactly back breaking for the DoD (or the VA, for that matter, whatever department has this issue on their table).

foota 9y ago
You're off by a factor of ten. Assuming monthly compounding: (1 + .06/12)^(12 * (2017-1944)) = 78.97 78.97 * 180 = 14214 However the final amount is highly sensitive to interest rate assumed, for different interest rates: .02 774.13 .04 3,321.26 .06 14,214.86 .08 60,692.55 .10 258,514.77 .12 1,098,489.57 However it's unlikely that the money would have been invested anyways.
- thomasz 9y ago
  You are wrongly calculating with $180 instead of $13. The $180 figure is $13 adjusted by inflation.
  - Retric 9y ago
    While true using 6% during periods where inflation was > 6% is a poor interest rate. IMO, inflation +4% is reasonable.
- ars 9y ago
  Can't include both interest and inflation. It's one or the other, not both.
  - Sumaso 9y ago
    You can certainly include both interest and inflation.
    - libeclipse 9y ago
      How so?
      - LyndsySimon 9y ago
        I'm not a mathematician by any means, but I would think that (interest rate) - (rate of inflation) = (effective interest rate)
        pc86 9y ago
        No
        smallnamespace 9y ago
        You've just defined the real interest rate, as opposed to the nominal rate
      - oliwarner 9y ago
        Say you put £100 in the bank 50 years ago. Compound interest tells us how much money we have. If we assume an improbably static 2% every year, today we have ~£270 in our account. Inflation doesn't work on top of that because £270 is what it's already worth today. Inflation tells us what our original £100 is worth in terms of buying power. If a loaf of bread cost £0.10 in 1967 but costs £1.50 today, we can say over 50 years there has been 150% inflation. These sorts of price index comparisons allow us to compare worth back then. Or in reverse, you can see this in very real terms. You could look at your £270 and see that would only buy you 180 loaves of bread. In 1967, your £100 would have garnered 1000 loaves. Interest has not kept up with inflation. You have lost money —in this example— by "saving" it. On a shorter timescale, RPI and CPI allow central banks to see inflation and —to a point— alter their base rates to help influence the balance of savers-vs-spenders, lessening the popular disposable cash, and lessening inflation. That's the theory, anyway.
        oliwarner 9y ago
        Though obviously I skwonked the percentage increase there. The inflation in that tiny bread example was 1400%
- emn13 9y ago
  He might have spent the money in ways that later benefited him - even if he bought a house that was 13$ more expensive, given the housing boom during his lifetime in many locations he would have made more than a 6% return. You're never going to be able to really figure that what-if game anyhow... I think interest is an appropriate simplification (certainly more appropriate than inflation).