Final answer:
In future value calculations, the variables include principal, interest rate, and time period, but not present value, as the latter refers to the current value of future money. Compound interest, which factors into the future value, is based on the principal and previously accumulated interest.
Step-by-step explanation:
The variables in a future value of a lump sum problem include the principal amount, interest rate, and time period. The one option that is not typically a variable in a future value calculation is the present value, since present value pertains to the current worth of a future sum of money given a specific interest rate. In other words, when calculating future value, you are projecting what an amount invested today, the principal, will grow to after compounded interest over a specified time period.
Compound interest is defined as the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods. This can be expressed with the formula: Future Value = Principal × (1 + interest rate)time period. To find the compound interest, you subtract the principal from this future value.
An example provided illustrates a three-year scenario where you would apply the formula and follow calculations in a specified table.