# cash flows, inflation and yield rates

A transaction has net cashflows of $C_0,C_1,C_2,...C_n,$ and $i_0$ is a yield rate for this transaction. Suppose now that the cashflows are "indexed to inflation" at periodic rate $r$, so that the transaction is modified to $C'_0=C_0, C'_1=C_1(1+r), C'_2=C_2(1+r)^2,..., C'_n=C_n(1+r)^n$. Show that $i'_0=(1+r)*i_0+r$ is a yield rate for the new transaction.