I would like some help with a fairly basic "value of money" question. (I'm very much a beginner in this field so please bear with me.)
I'm writing about income changes throughout a decade (2010-2019). And I would like to convert a bunch of random incomes (lump sums) from different years to their "2020" value.
I found the formula for the present and future value calculations. My problem is that I do not know what to put in place of the "r" and if I'm using the right formula.
Suppose that I have an amount of $3000, and this amount is an income in the year 2011. Now do I understand it correctly that I need to use the FV formula if I want to know its value for the current year (2020)?
So it would look something like: FV = 3000 x (1+r1) x (1+r2) ... x (1+r9), right? (9 because 2020-2011 = 9, that's why I wrote 9, correct me if I'm wrong please)
Similarly, with another example, would $5000 from 2019 look like this for 2020: FV = 5000 x (1+r1) ? So just one r.
But what exactly is r? Is it simply the inflation for each year? Do I just take the yearly inflation rate of my country in each year from 2011 to 2019 and use it as r1, r2, r3 etc.? Or from 2012 to 2020? IF it really is just the inflation rate, then for r1 do I start with the inflation rate of 2011 or 2012? If I'd like to see the value of a 2011 lump sum for 2020, then r1 should be the inflation rate of 2012? Or what do I put in the place of r if not this?
OR do I have to do something entirely different to get the results I need?
Thanks in advance, any help is very much appreciated!!