How much does Carla need to invest in order to have an annual income of $5000?
Investment amount = Income Desired / Interest Rate
Investment amount = $5000 / 0.04
Investment amount = $125,000
Carla needs to invest $125,000 at a 4% interest rate to have an annual income of $5000.
Understanding Investment Amount Calculation
Carla's Financial Goal:
Carla has $120,000 to invest and her goal is to generate an annual income of $5000. In order to achieve this goal, she needs to determine how much she should invest and at what interest rate to earn $5000 annually.
Calculating the Investment Amount:
To calculate the investment amount needed for Carla to generate an annual income of $5000, we use the formula: Investment amount = Income Desired / Interest Rate. In this case, the interest rate is assumed to be 4%.
Substitute Values into the Formula:
By substituting the values, we get:
Investment amount = $5000 / 0.04
Investment amount = $125,000
Final Answer:
Carla needs to invest $125,000 at a 4% interest rate to achieve her goal of having an annual income of $5000.