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 need $15,000 in 12 months to pay for your property taxes. How much must you invest in months 1 to 12 to exactly pay for your property tax if your investments earn 3% APR, compounded monthly?

Answer 1

Funding – Ordinary level annuity funds lump sum

FV = $15,000
Nper = 12
Rate = 3% / 12 = 0.25%
PV = 0

Monthly investment can be calculated by using the following excel formula:
=PMT(rate,nper,pv,fv)
=PMT(0.25%,12,0,-15000)
= $1,232.91

Monthly investment = $1,232.91