If Cole wants to retire with income of $2,000 per month, how much principal is necessary to generate this amount of monthly interest income if the interest rate is 6%?
A) $\$ 1,200,000$
B) $\$ 12,000$
C) $\$ 400,000$
D) $\$ 33,333$
E) $\$ 144,000$

Question

Quizplus · Accepted Answer

To generate $2,000 of monthly interest income at a 6% interest rate, we need to use the formula:
Principal x Interest Rate = Annual Interest Income
Annual Interest Income / 12 = Monthly Interest Income
Substituting the values given, we get:
Principal x 0.06 = $24,000
Principal = $24,000 / 0.06
Principal = $400,000
Therefore, the necessary principal is $400,000.

If Cole Wants to Retire with Income of $2,000 Per $1,200,000\$ 1,200,000$1,200,000

If Cole Wants to Retire with Income of $2,000 Per $\$ 1,200,000$