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 $1500 interest rates are currently quoted at 10% josh's bank compounds interest every 2 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's savings after 2 years = 1500*(1+10%/12)^24 + future value of $150 saved monthly

This future value can be calculated in Excel as =FV(10%/12,24,-150,0,0) = 3967.04

So Drake's savings = 1500*(1+10%/12)^24 + 3967.04 = $5797.62

Josh's savings after 2 years = future value of $100 saved every 2 weeks

This future value can be calculated in Excel as =FV(10%/26,52,-100,0,0) = 5744.29, as there are 26 such 2-week periods in a year and 52 such 2-week periods in 2 years

So Josh's savings = $5744.29

Drake has more savings. So the most expensive car is $5797.62

Hope this detailed explanation helped ! Let me know in case of any queries.

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