Time Value of Money
In the News: “What $100 Was Worth”
Answers
$100 is more valuable today than in the future because if you had the money in hand today,
you could invest it and earn interest on it. Another reason $100 is more valuable today is
because money loses value over time, due to inflation. When your parents (and grandparents)
were young, $100 was worth a lot more.
Directions: Use this link to the article on Business Insider
(https://www.businessinsider.com/what-100-was-worth-in-the-decade-you-were-born-2016-
6#-1), which explains how the value of $100 has changed over time, to answer the following
questions.
1. What was $100 worth in 1925, in terms of today’s dollars. Why was it so valuable?
$1,367.21 Because the price level was much lower. The value of a dollar is determined by
what it can buy.
2. If you found a $100 bill printed in 1925 (assume it’s in regular condition, so it’s not a
collectible) how much would it be worth right now?
It would be worth $100, exactly as it says on the face of it.
3. If your great-grandparent had $100 in 1925 and invested it at 3% interest, compounded
monthly, how much would it be worth now? (You can use
https://www.investopedia.com/calculator/fvcal.aspx)
In 2019, after 94 years, it would be worth $100 x (1.0025)
1128
= $1,671.79
The money would actually gain value over time, despite inflation.
4. Is the article saying you could buy four round-trip plane tickets with $100 in 1935? Explain.
No. Domestic air travel wasn’t available in 1935. The article is simply expressing the value of
$100.
5. How much has the value of a dollar changed since 2010?
It has lost about 9% of its value. From $109.72 to $100.
6. If you have a large sum of money, say $100, why is it a bad idea to just hide it in your
bedroom?
It will lose value AND you are giving up the opportunity to earn interest on it.
