3 ms·
If (annual) inflation is 40%, then the annual discount factor is 1.40 and the monthly one is c = 1.40^(1/12) ≈ 1.0284. Assuming the $100 payments are paid at t
by CaptainNegative 5y ago
If (annual) inflation is 40%, then the annual discount factor is 1.40 and the monthly one is c = 1.40^(1/12) ≈ 1.0284.
Assuming the $100 payments are paid at the end of each month, the value of the money sent over in today's dollars is $((100/c^1) + (100/c^2) + (100/c^3) + ... + (100/c^12)) which is a geometric series with ratio 1/c, so the sum is (100/c^1 - 100/c^(12+1))/(1-1/c) ≈ $1005.
So take the cash offer.
For spreadsheet calculations, look into the SERIESSUM flavor of macros.
- medvezhenok 5y agoThat's computing based on purely the discounted value of money. The more useful metric is not the % of inflation, but rather the % you can get on your money lying around (your answer assumes that to be 40% annually as well - i.e. a real rate of zero, but real rates on all of your options could be deeply negative as well). (though from an academic point of view you are completely correct)