An Amount Is to Be Deposited in a Savings Account

question 133

Multiple Choice

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) Present value of a single amount.
• B) Present value of an annuity.
• C) Future value of a single amount.
• D) Future value of an annuity.

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Definitions:

Market Output

The total quantity of a good or service produced and sold by firms in a particular market.

Intertemporal Price Discrimination

A pricing strategy where prices are varied over time for the same product to exploit differences in willingness to pay.

Second-Degree Price Discrimination

A pricing strategy where prices vary according to the quantity consumed or the version of the product, without personal characteristics of the buyer influencing the price.

First-Degree Price Discrimination

A pricing strategy where a seller charges each buyer their maximum willingness to pay, capturing all consumer surplus.