Mary's goal is to have saving of $1,200 in one year's time.The current interest rate is 4%.
Mary has to save ______ now to achieve this goal.If the interest rate was to change to 2%,she would have to save _______.

Question

Quizplus · Accepted Answer

To find out how much Mary has to save now at an interest rate of 4%, we can use the formula: 
Future Value = Present Value x (1 + Interest Rate)^Time 
Where Present Value is the amount Mary has to save now, Interest Rate is 4% or 0.04, Time is 1 year and Future Value is $1,200. Substituting the values, we get: 
$1,200 = Present Value x (1 + 0.04)^1 
$1,200 = Present Value x 1.04 
Present Value = $1,200/1.04 
Present Value = $1,153.85 (rounded to nearest cent)

If the interest rate was to change to 2%, we can use the same formula to find out how much Mary would need to save: 
$1,200 = Present Value x (1 + 0.02)^1 
$1,200 = Present Value x 1.02 
Present Value = $1,200/1.02 
Present Value = $1,176.47 (rounded to nearest cent)

Therefore, the answer is C) $1,154;$1,176 as it provides the correct amounts Mary has to save in both situations.

Mary's Goal Is to Have Saving of $1,200 in One