Your company have a policy of paying gratuity equivalent to 10 years services based on the last drawn salary for staff that have serve more than 20 years with the company

Currently you have 200 employees and all of them are expected to stay with the company for more than 20 years at the age of 60. Based on their age structure, every year 15% of the employees are expected to retire and replaced by new one.

The first batch of employees will retire in 15 years times.

You want to create an endowment fund to take care of the gratuity obligation every year beginning fifteen years from now.

Required

a. How much saving that you must make every month from now to prepare for the retirement gratuity fund

b. How much endowment fund will the company have at the end of 15 years.

c. Will the endowment be sustainable to take care of the future retirement gratuity obligation

Answer rating: 100% (QA)

a Monthly savings required to prepare for the retirement gratuity fund Assumptions The average annual salary of an employee is 50000 The gratuity paym... View the full answer