Drake and Josh (2 brothers) are each trying to save enough money to buy their ow

Question

Drake and Josh (2 brothers) are each trying to save enough money to buy their own cars. Josh is planning to save $100 from every paycheck (he is paid every 2 weeks.) Drake plans to put aside $150 each month but has already saved $1,500. Interest rates are currently quoted at 10 percent. Josh's bank compounds interest every two weeks while Drake's bank compounds interest monthly. At the end of 2 years they will each spend all their savings on a car (each brother buys a car). What is the price of the most expensive car purchased?

Explanation / Answer

Drake amount saved:

we can use fv formulae in excel to solve this.

=fv(rate,nperr,pmt,pv,type)

rate=10%/12(since monthly)

nper=2*12=24

pmt=150

pv=1500

=fv(10%/12,2*12,-150,-1500,0)

=$5797.62

josh money saved:

rate=10%/26 (assuming 52 weeks a year)

nper=2*26

pmt=-100

pv

=fv(10%/26,2*26,-100,,0)

=$5744.29

we can find that josh has saved more money and expensive car price is $5797.62

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