A professor wants to supplement her pension with investment interest. If she invests $26,000 at 4% interest, how much more would she have to invest at 8% to achieve a goal of $2,400 per year in supplemental income?
To find out how much more the professor would have to invest at 8% interest to achieve a goal of $2,400 per year in supplemental income, we can follow these steps:
Step 1: Calculate the interest earned from the initial investment at 4% interest.
Interest = Principal x Rate
Interest = $26,000 x 4% = $1,040
Step 2: Determine the remaining supplemental income needed.
Remaining supplemental income = Goal supplemental income - Interest earned from initial investment
Remaining supplemental income = $2,400 - $1,040 = $1,360
Step 3: Calculate how much additional investment is needed at 8% interest.
Additional investment = Remaining supplemental income / Rate
Additional investment = $1,360 / 8% = $17,000
Therefore, the professor would have to invest an additional $17,000 at 8% interest to achieve a goal of $2,400 per year in supplemental income.