Question

Sara wants to have $X in her savings account when she retires. How much must she put in the account now, if the account pays a fixed interest rate of Y%, to ensure that she has $X in Z years?

Answer 1

To calculate how much money Sara needs to put in her savings account now, use the formula for compound interest.

Step-by-step explanation:

To calculate how much money Sara needs to put in her savings account now, we can use the formula for compound interest. The formula is:

A = P(1 + r/n)^(nt)

Where:

• A is the future value of the investment
• P is the present value or the initial investment
• r is the annual interest rate (expressed as a decimal)
• n is the number of times the interest is compounded per year
• t is the time in years

By rearranging the formula, we can solve for P (the present value):

P = A / (1 + r/n)^(nt)

By plugging in the values for A, r, n, and t, we can calculate the amount Sara needs to put in her savings account now to reach her goal of $X in Z years.