An amount is to be deposited in a savings account at the end of each year in order to provide funds for a trip to Europe, at the end of the fourth year. You have been asked to determine the amount of the annual deposit. What is the interest concept that best describes this application?
A) Future value of an annuity.
B) Future value of a single amount.
C) Present value of a single amount.
D) Present value of an annuity.

Question

Quizplus · Accepted Answer

The interest concept that best describes this application is the future value of an annuity because the objective is to determine the amount of the annual deposit required to accumulate the needed funds in four years. This involves calculating the future value of a series of equal annual deposits at a given interest rate over a specified period of time.

An Amount Is to Be Deposited in a Savings Account