Question

An airport in Japan is planning to purchase a parcel of land for building additional executive hangars in five years. The price of land currently is $2,000,000. The average inflation rate is 5 percent in the next five years. How much should the airport invest in a uniform amount per year for five years in an account that pays 8 percent interest annually to be able to purchase the land in five years?

Answer 1

The airport should invest a uniform amount of
`A=`$357,958.55

Step-by-step explanation:

Hi

First of all, we need to know how much will cost the land in five years so we have,
`F=2000000*(1+0.05)=2100000`, that means that the future value of the land will be $2'100,000.

Now we can use
`A=(F)/(((1+i)^(n) -1)/(i) )` with
`F=2100000, n=5` and
`i=8`%, so we have
`A=(2100000)/(((1+008)^(5) -1)/(0.08) )=357958.55`