Discount rate/time value math help please...

[Smilinggirl]

Hi everyone. You've all been quite helpful as I'm trying to branch out with investing and long term planning, so I thought I'd see if anyone can help me with something else. I'd like to know what is a reasonable lump sum to replace 10 years worth of monthly payments that would equal 300,000. I tried using time value calculators, but they only seemed to work if you're comparing one payment now to one payment in the future rather than monthly payments, plus I'm not particularly good (well, really not at all) with algebra, so after a few frustrating hours, I decided to see if anyone here could help.

If you were going to consider a lump sum payment now to replace 10 years of monthly payments that would equal 300,000, what number would you be comfortable accepting? I have a low risk tolerance, so I tend to be conservative in my investing. I would do a monthly draw down from the lump sum, just as if I was making the monthly payments to myself.

Thank you in advance for any help you can provide!!!

[srblanco7]

If you were going to consider a lump sum payment now to replace 10 years of monthly payments that would equal 300,000, what number would you be comfortable accepting? I have a low risk tolerance, so I tend to be conservative in my investing. I would do a monthly draw down from the lump sum, just as if I was making the monthly payments to myself.

Thank you in advance for any help you can provide!!!

I'll take a shot - and others can check my math. Assuming there are two parties to this transaction, the recipient and the provider, you may have two different perspectives on what represents a fair rate. So I'll provide three results at different rates as a sensitivity analysis.

@5% rate: lump sum = $236,685
@7% rate: lump sum = $216,571
@9% rate: lump sum = 198,834

[disneysteve]

@5% rate: lump sum = $236,685
@7% rate: lump sum = $216,571 @9% rate: lump sum = 198,834

That's very nice, but OP, if you plan to just put the money somewhere super conservative like a money market account, you're only going to earn 0.5%. Maybe as high as 1% in a CD. In that case, you pretty much need the entire 300K.

Why are you looking to get it in a lump sum? Are you concerned about the financial health of the entity making the payments?

[Smilinggirl]

Trying to find compromise. As things stand right now, the monthly payments are legally binding, but if I can find a way to placate the other side, I'm willing to try just for the sake of peace. I do not intend to sacrifice what is legally due to me though.