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melissa wants to retire with $40,000 per month. she needs $4,000,000 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 25 years before retirement and has $80,000 to invest today, what simple interest rate does she need to achieve the necessary amount of principal?

Respuesta :

190 % of simple interest rate does she need to achieve the necessary amount of principal.

we know that

The simple interest formula is equal to

A=P(1+rt)

where

A = Final Investment amount

P = Principal amount of money

r = rate of interest  

t = Number of Time Periods

in this problem we have

t= 25 years

P= $80,000

A= $4,000,000

r=?

substitute in the formula above

4,000,000 = 80,000(1+25r)

50 = 1+25r

50-1=25r

49=25r

r=1.96

Convert to percentage

r = 1.9 * 100

  = 190 %

The simple interest rate is 190%

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