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I am exceedingly bad at math and percentages and have no idea how to arrive at the given answer to this problem myself: "If I hand you $1,000 today, and inflation is meet at 4%, my generous gift will be worth only $962 this time next year. A ten-year

Inflation implies that the 'good' of a sum has eroded. For one year this is 1000/(1+i), where i is the inflation rate; here:
1000/1.04 = 951.63 = 962.
For ten years, we need to compound the rate i, as follows (1+i)^n, and so here:
1000/(1.12)^10
John V | Aug 16, 2007

Inflation implies that the 'value' of a sum has eroded. For one year this is 1000/(1+i), where i is the inflation rate; here:
1000/1.04 = 951.63 = 962.
For ten years, we need to compound the rate i, as follows (1+i)^n, and so here:

John V | Aug 16, 2007