Question

How much would a business have to invest in a high-growth fund to receive $15,000 at the end of every month for 7 years, receiving the first payment 2 years from now. The investment earns interest at 8.50% compounded monthly.

Answer 1

Monthly receipt	$15000
Annual interest	8.50%
Monthly interest rate	0.71%
Number of years	7
Number of months in 7 years	84
Amount 2 years from now	$947,179.86
Number of months in 2 years	24
Amount to be invested now	$799,581.33

Excel formulas:

If you want to do it without excel, then refer the following:

Step 1: Find the amount that should be in the account for 2 years from now:

We can use the present value of the annuity formula:

Where,
PVA = Present value of the annuity
A = Annuity or payment
i = Interest rate in decimal form (i.e 8.50% = 0.085)
a = Number of payments in a year
n = Number of years

Therefore,

Step 2: Find the present value of  $947,179.86.

"a" here is number of compounding in a year.

Therefore,

Therefore, the amount that should be invested today is $799,581.33