Paul Davis wants to deposit a lump sum of money today for a vacation that he plans to take to Asia after he graduates from Graduate School. Which formula should he use to determine the amount of money he will have available for his vacation?

Options:A) Present value of a single amount

B) Future value of a single amount

C) Simple interest

D) Present value of an annuity

E) Future value of an annuity

Answer:B) Future value of a single amount.

Explanation: Future value of a single amount is an accounting concept used to describe how much a single lump sum of money deposited in a bank account would have grown up to after a given period of time. Future value of a single amount can be obtained by

multiplying the principal (P) * the interest rate (I) * time (t) The interest rate is expressed as a decimal.

The FV = P (1 + rt).

Future value of a single amount is usually used in calculating the total accrued amount of fixed deposits accounts, it is a single period investment.