Answer to Question #170341 in Finance for Reece Arendse

Question

Josh intends to retire early and wants to understand how much he should save of his monthly salary of R25 000 to develop an asset that will pay him his salary monthly once he has retired. Assuming that he would need to develop an asset of R3 000 000, and that he can obtain an interest rate and return of 10% per annum, compounded monthly, for the next 20 years, what should he save monthly to achieve this? 

Answer 1

Using the formula for the future value of annuity:

$P = \frac{3,000,000×0.1/12} {(1+0.1/12)^{20×12} - 1} = 3,950.65.$