Question

How much would a business have to invest in a fund to receive $19,000 at the end of every month for 6 years? The fund has an interest rate of 4.50% compounded monthly and the first withdrawal is to be made in 2 years and 1 month.

Answer 1

  

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Present Value Annuity after 2 years =

where r is the rate of Return for compounding period = 4.5% / 12 = 0.00375

n is the no of compounding period 6 years * 12 = 72

=

= 1196923.55023

Present Value today = = 1196923.55023 / (1+r)^n

r = 0.00375

n = 2 years * 12 = 24

= 1,196,923.55023 / (1+0.00375)^24

= 1,094,089.91