Megan wants to buy a designer handbag and plans to earn the money from babysitting. Suppose the interest rate is 7% and she is willing to wait one year to purchase the bag. How much babysitting money will she need to earn today to buy the bag for $550 one year from now? (Enter just the number in dollars without the $ sign or a comma and round off decimals to the closest integer, i.e., rounding $30.49 down to $30 and rounding $30.50 up to $31.)

To find out how much money Megan needs to earn today, we can use the formula for present value (PV), which discounts the future value (FV) using the interest rate (r):

\[
PV = \frac{FV}{(1 + r)}
\]

Where:
- $FV$ is the future value of the handbag ($550).
- $r$ is the interest rate (7%, or 0.07 in decimal form).
- $PV$ is the present value, which is the amount Megan needs to earn today.

Let's plug in the values:

\[
PV = \frac{550}{(1 + 0.07)} = \frac{550}{1.07}
\]

Now, let's calculate the present value.# Given values
future_value = 550  # Future value of the handbag in dollars
interest_rate = 0.07  # Interest rate (7%)

# Present value formula
present_value = future_value / (1 + interest_rate)

# Rounding off to the nearest dollar
rounded_present_value = round(present_value)
rounded_present_valueMegan will need to earn $514 today to be able to buy the handbag for $550 one year from now at an interest rate of 7%.

Do you want more details or have any questions?

Here are 5 related questions:
1. How would the present value change if the interest rate were 10% instead of 7%?
2. What would the present value be if Megan wanted to buy the handbag in two years instead of one?
3. Can we calculate the future value if Megan only has $500 today at 7% interest for a year?
4. How does compound interest affect such calculations when applied over multiple years?
5. If Megan could invest in a savings account at 7% interest, how much would she have in 5 years if she saved $514 today?

**Tip:** The higher the interest rate, the lower the present value needed for future purchases.

Learn how to calculate the present value of money needed today to buy a designer handbag in one year, given a 7% interest rate. Megan wants to earn enough from babysitting to purchase a $550 handbag. Find out how much she needs to earn today!

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