Question

A Asset Valuation = Price B Wealth Accumulation C Funding – Lump sum funds lump sum D Funding – Lump sum funds ordinary level annuity E Funding – Lump sum funds delayed level annuity F Funding – Ordinary level annuity funds lump sum G Funding – Ordinary level annuity funds delayed level annuity H Choosing Among Alternatives Classify the problem as one of the above types. Choose Only One You are managing a trust fund that must pay its owner $13,574 each month, for 74 months, (starting next month). How much do you need to invest today to make the trust fund payments if your investments earn 4.89% APR (compounded monthly)?

Answer 1

Ordinary level annuity funds lump sum

PMT = $13,574
Nper = 74
Rate = 4.89% / 12 = 0.4075%
FV = 0

The amount you need to invest today can be calculated by using the following excel formula:
=PV(rate,nper,pmt,fv)
=PV(0.4075%,74,-13574,0)
= $865,657.42

The amount you need to invest today = $865,657.42