Question

A teacher wants to earn $1500 per year in supplemental income from a cash gift of $16,000. She puts $6,000 in a credit union that pays 7% annual interest. What rate must she earn on the remainder to achieve her goal

Answer 1

6,000 * .07 = $420 per year

Therefore the remaining 10,000 must earn 1,080 per year

Total = Principal * (1+rate)^years OR

Total = 10,000 * 1 + rate

1,080 = 10,000*rate

1,080 / 10,000 = rate

rate = .108 OR rate = 10.8 % per year

Explanation: