Final answer:
Parminder would need to have approximately $62,312.06 in investments to generate an extra $400 per month at a 77% annual interest rate, assuming simple interest.
Step-by-step explanation:
Parminder wants to supplement his pension by $400 per month with income from his investments that earn a 77% annual interest rate (which is 6.4167% monthly, assuming a simple interest divided evenly over 12 months). To calculate the value of investments needed, we can use the formula for the interest earned I = P * r * t, where I is the interest, P is the principal amount (initial investment), r is the monthly interest rate, and t is the time in months. In this case, Parminder wants to earn $400 per month from his investments.
To find P, we rearrange the formula to P = I / (r * t). We only need to cover one month (t = 1), so P = 400 / (0.064167), giving us a principal investment required of approximately $62,312.06.
Investing this amount at a 77% annual interest rate will allow Parminder to withdraw $400 monthly while preserving his initial investment.