Rafael Sandino’s parents are in their retirement years. They just received $501,000 after taxes from the sale of their vacation home and decided to invest the money in a bond mutual fund. They chose a no-load mutual fund that yields 6%. a) How much will they receive each year? b) How much would they need to invest if they needed to earn $36,000 per year?
.06 * 501,000= 30,060
.06 x = 36,000
x = 36,000/.06
a) To calculate how much they will receive each year, we will use the formula for calculating the annual income from an investment:
Annual Income = Principal Amount x Interest Rate
In this case, the principal amount is $501,000 and the interest rate is 6%.
Annual Income = $501,000 x 0.06
Annual Income = $30,060
Therefore, they will receive $30,060 each year.
b) To calculate how much they would need to invest in order to earn $36,000 per year, we can rearrange the formula:
Principal Amount = Annual Income / Interest Rate
In this case, the annual income is $36,000 and the interest rate is 6%.
Principal Amount = $36,000 / 0.06
Principal Amount = $600,000
Therefore, they would need to invest $600,000 in order to earn $36,000 per year.
To calculate how much Rafael Sandino's parents will receive each year from their investment in the bond mutual fund, we need to use the formula for calculating interest:
Interest = Principle x Interest Rate
a) To find the annual amount, we need to multiply the invested amount by the interest rate.
Interest = $501,000 x 6% = $30,060
Therefore, they will receive $30,060 each year from their investment in the bond mutual fund.
b) To determine how much they would need to invest to earn $36,000 per year, we will rearrange the formula:
Principle = Interest / Interest Rate
Plugging in the values:
Principle = $36,000 / 6% = $600,000
Therefore, they would need to invest $600,000 in the bond mutual fund to earn $36,000 per year.