The balance of your investment investment account will grow at 12% APR no matter what the rate of inflation.

This means that after two years the account value will be 1.12² = 1.2544 times more than the starting balance.

But... since the value of money has -- in some economist's delusionally uniform world -- decreased by 6%/annum for two years, you now require 1.06² = 1.1236 times more than the starting balance just to be able to buy what you did two years ago.

You'd think that because 12% is 2x as large as 6% that you'd have 2x as much money every year. Not so, because compounding is a power function while ratios are linear:

1. the 12% growth in two years (25.44%) is 5.8% larger than the 6% growth in two years (12.36%).
2. After three years, it's 11.99% larger.
3. After four years 18.5% larger.
4. After five years 25.4% larger.

The formula for the yearly percentage difference between a 12% investment and 6% inflation is calculated by ((1.12^A)-1)/((1.06^A)-1) - 2 where A is the number of years since the start.

This is derived from:

1.12^A/1.06^A

Correct: I've not mentioned your 100000 starting amount, because it's irrelevant. Multiply your starting balance (whatever it's size, whether 20 or 80 or 10^5 or 4.2*10^72) by 1.06^A and 1.12^A to get the values for each year A. And naturally, the .12 and .06 can be changed to any number you'd like depending on the investment and inflation rates.

The balance of your investment investment account will grow at 12% APR no matter what the rate of inflation.

This means that after two years the account value will be 1.12² = 1.2544 times more than the starting balance.

But... since the value of money has -- in some economist's delusionally uniform world -- decreased by 6%/annum for two years, you now require 1.06² = 1.1236 times more than the starting balance just to be able to buy what you did two years ago.

You'd think that because 12% is 2x as large as 6% that you'd have 2x as much money every year. Not so, because compounding is a power function while ratios are linear.

The formula for the yearly percentage difference between a 12% investment and 6% inflation is calculated by ((1.12^A)-1)/((1.06^A)-1) - 2 where A is the number of years since the start.

This is derived from:

1.12^A/1.06^A

Correct: I've not mentioned your 100000 starting amount, because it's irrelevant. Multiply your starting balance (whatever it's size, whether 20 or 80 or 10^5 or 4.2*10^72) by 1.06^A and 1.12^A to get the values for each year A. And naturally, the .12 and .06 can be changed to any number you'd like depending on the investment and inflation rates.

The balance of your investment investment account will grow at 12% APR no matter what the rate of inflation.

This means that after two years the account value will be 1.12² = 1.2544 times more than the starting balance.

But... since the value of money has -- in some economist's delusionally uniform world -- decreased by 6%/annum for two years, you now require 1.06² = 1.1236 times more than the starting balance just to be able to buy what you did two years ago.

You'd think that because 12% is 2x as large as 6% that you'd have 2x as much money every year. Not so, because compounding is a power function while ratios are linear:

1. the 12% growth in two years (25.44%) is 5.8% larger than the 6% growth in two years (12.36%).
2. After three years, it's 11.99% larger.
3. After four years 18.5% larger.
4. After five years 25.4% larger.

The formula for the percentage difference between a 12% investment and 6% inflation is calculated by ((1.12^A)-1)/((1.06^A)-1) - 2 where A is the number of years since the start.

Correct: I've not mentioned your 100000 starting amount, because it's irrelevant. Multiply your starting balance (whatever it's size, whether 20 or 80 or 10^5 or 4.2*10^72) by 1.06^A and 1.12^A to get the values for each year A. And naturally, the .12 and .06 can be changed to any number you'd like depending on the investment and inflation rates.

The balance of your investment investment account will grow at 12% APR no matter what the rate of inflation.

This means that after two years the account value will be 1.12² = 1.2544 times more than the starting balance.

But... since the value of money has -- in some economist's delusionally uniform world -- decreased by 6%/annum for two years, you now require 1.06² = 1.1236 times more than the starting balance just to be able to buy what you did two years ago.

You'd think that because 12% is 2x as large as 6% that you'd have 2x as much money every year. Not so, because compounding is a power function while ratios are linear:

1. the 12% growth in two years (25.44%) is 5.8% larger than the 6% growth in two years (12.36%).
2. After three years, it's 11.99% larger.
3. After four years 18.5% larger.
4. After five years 25.4% larger.

The formula for the yearly percentage difference between a 12% investment and 6% inflation is calculated by ((1.12^A)-1)/((1.06^A)-1) - 2 where A is the number of years since the start.

This is derived from:

1.12^A/1.06^A

Correct: I've not mentioned your 100000 starting amount, because it's irrelevant. Multiply your starting balance (whatever it's size, whether 20 or 80 or 10^5 or 4.2*10^72) by 1.06^A and 1.12^A to get the values for each year A. And naturally, the .12 and .06 can be changed to any number you'd like depending on the investment and inflation rates.