Question

Eben celebrates his 50th birthday anniversary today. He wishes to have GHȼ1 million in his retirement savings when he finally retires in ten years’ time. If he can earn 10% on savings, how much must he save monthly in order to achieve his target, starting at the end of the month?

Answer 1

To achieve his retirement goal of GHȼ1 million, Eben must save approximately GHȼ5,898.26 per month.

Step-by-step explanation:

To calculate the amount Eben must save monthly to achieve his retirement target, we can use the formula for future value of an annuity:

FV = PMT * ((1 + r)^n - 1) / r

Where:

• FV is the future value of the annuity (GHȼ1 million)
• PMT is the monthly savings amount
• r is the monthly interest rate (10% / 12 = 0.0083)
• n is the total number of periods (10 years * 12 months per year = 120 months)

Plugging in the values, we have:

GHȼ1,000,000 = PMT * ((1 + 0.0083)^120 - 1) / 0.0083

Solving for PMT, we find that Eben must save approximately GHȼ5,898.26 per month to achieve his retirement goal.