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Maria Miller has $190,000 to invest. She wants to be able to withdraw $15,960 every year forever without using up any of her principal, what interest rate would her investment have to earn in order for her to be able to do so? (Round answer to 2 decimal places, e.g. 15.25.) Interest rate

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Answer #1

IT IS A CASE OF PERPETUITY

PRESENT VALUE = A/RATE, WHERE PRESENT VALUE = 190000, A = ANNUAL AMOUNT = 15960

190000 = 15960/RATE

RATE = 15960/190000 = 0.084 = 8.40%

ANSWER : INTEREST RATE = 8.40% (THUMBS UP PLEASE)

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