Question 1

What is the formula to calculate future cost of living adjusted for inflation?

Accepted Answer

Future Cost is calculated using compound inflation: FV = PV x (1 + r)^n, where PV is current cost, r is annual inflation rate / 100, and n is number of years.

Question 2

What is Purchasing Power Erosion caused by inflation?

Accepted Answer

Purchasing power erosion reflects how inflation reduces the real value of money over time. At 6% annual inflation, ₹100 today will have the purchasing power of only ₹55 after 10 years.

Question 3

What is the Rule of 72 for estimating price doubling time?

Accepted Answer

Divide 72 by the annual inflation rate to find the number of years it takes for prices to double. At 6% inflation, living expenses double every 12 years (72 / 6 = 12 years).

Question 4

What is the Real Rate of Return after accounting for inflation and tax?

Accepted Answer

The exact real return is (1 + post-tax nominal return) ÷ (1 + inflation) − 1. Simple subtraction is only an approximation. For example, 5.6% post-tax nominal return and 6% inflation gives about −0.38% real return.

Question 5

Which asset classes in India historically beat CPI inflation?

Accepted Answer

No asset class is guaranteed to beat inflation over a chosen horizon. Results depend on dates, asset selection, costs, taxes and measurement index; use current, source-specific historical data only as context—not as a forecast.

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