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In: Accounting

Josh and Becky are each trying to save enough money to buy their own cars. Josh...

Josh and Becky are each trying to save enough money to buy their own cars. Josh is planning to save $100 each fortnight. Becky plans to save $150 each month, but she already has $1 500 saved.
Josh’s bank compounds interest fortnightly at 3.95% per annum. Becky’s bank compounds interest monthly at 4% per annum.
At the end of two years, they will each purchase a car.
Formulas are provided on the last pages of this question booklet.
Required:
Show your workings!
a. What will be the price of the car Josh can purchase?
b. What will be the price of the car Becky can purchase?
c. What bank offers the better interest rate?

Solutions

Expert Solution

Please hit like if this helps, comment in case of any further doubt.

a. Josh can purchase a car of the price upto $5,406.67

b. Becky can purchase a car of the price upto $5,366.15

c. Becky's bank offers the better interest rate at an effective annual yield of 4.074% as compared to the 4.026% offered by the Josh's bank.

ekkarill92 answered 2 years ago
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