A worker wants to set aside some money for retirement, hoping to live off of the interest income. If the interest rate is 10% and he wishes to draw interest of $50,000 per year, how much should he save before retirement?

Question

Quizplus · Accepted Answer

The amount of money that needs to be saved can be calculated using the formula: Principal = Interest / Interest Rate. In this case, the interest is $50,000 and the interest rate is 10%, so the principal amount that needs to be saved is $50,000 / 0.1 = $500,000.

A Worker Wants to Set Aside Some Money for Retirement