Question

Melissa wants to retire with $50,000 per month. She needs $5,000,000 in principal at the time she retires in order to generate this amount of monthly income if the interest rate is 12%.
If Melissa has 26 years before retirement and has $125,000 to invest today, what simple interest rate does she need to achieve the necessary amount of principal?​

Answer 1

Answer:

$r=150\%$

Step-by-step explanation:

we know that

The simple interest formula is equal to

$A=P(1+rt)$

where

A is the Final Investment Value

P is the Principal amount of money to be invested

r is the rate of interest  

t is Number of Time Periods

in this problem we have

$t=26\ years\\ P=\ 125,000\\ A=\ 5,000,000\\r=?$

substitute in the formula above

$5,000,000=125,000(1+26r)$

$40=(1+26r)$

$26r=40-1$

$26r=39$

$r=1.5$

Convert to percentage

$r=1.5*100=150\%$