Theodore purchased a new car in May of 1956 for $2,500. Theodore wants to know
what the equivalent of $2,500 would be today. Assume that there has been an average rate of inflation over this time of 3.2%. With this assumption, what would the equivalent value of $2,5oo in 1956 be today?
Answer (Here are the numbers to input into your HP 10bii)
N (stands for "number" in months) = 720 (This is the time frame, which is 60 years from 1956 to today. 60 years x 12 months/year)
I/YR (stands for "interest rate/year") = 3.2 (this is the interest rate. In this example, the interest rate is the rate of inflation, which we are assuming to be 3.2%)
PV (stands for "present value") = -2.500 (This is the amount of money spent in 1956)
PMT (stands for "payments") = 0 (there are no payments being made or received during this time frame)
FV (stands for "future value") = ???? (this is what we are working to solve. This will be what the equivalent of $2,500 will be today)
After entering in all of the numbers above, we learn that the equivalent value of $2,500 in 1956, assuming 3.2% inflation is $17,008.88.