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A real estate development company is planning to bulid five homes, each costing $125,000, in 2.5years. the bank pays 6% interest compound semiannually. how much should the company invest now to sufficemt funds to build homes in the future?

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  1. Future value, F = 5*125000=625000
    Interest, i = 6% annually = 0.06
    compounding frequency, f = 2
    Time, t = 2.5 years
    Let
    P = present value
    then use the compound interest formula
    F=P(1+i/f)ft

    Solve for P
    P=F/(1+i/f)ft
    =625000/(1+0.06/2)2*2.5
    =539130.49
    =

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    posted by MathMate

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