Question

Mike and Kate plan to save money for their wedding over a 20 month period. They will need to save $8,000 to help pay for the wedding. They set aside the same amount each month. After a year they saved $4,000. Mike and Kate know they must adjust their plan in order to meet their goal, so they came up with the following options: Option A: Stay with saving the same amount they've been saving each month but postpone the wedding 2 months. Option B: Increase the amount of money they save each month by $80 from what they've been saving. Which of the following is a true statement?

a. Only option A will allow them to meet their goal.
b. Only option B will allow them to meet their goal.
c. Both options A and B will allow them to meet their goal.
d. Neither option A nor option B will allow them to meet their goal.

Answer 1

D is the correct answer. Mike and Kate require $8000 for their wedding and have saved $4000 already, so they need a further $4000. They have saved the money over 12 months, which means they have been saving $333.33 every month (4000/12). In Option A they have 10 months to save money - the original 8 months, plus the 2 months the wedding is postponed. This will give them the chance to save $3333.33 (333.33 x 10). In Option B, they can increase their monthly savings by $80, giving them total monthly savings of $413.33 (333.33 + 80). In the remaining 8 months before the wedding, they will be able to save $3306.66 (413.33 x 8). However, neither of these options give them the $4000 required to make their $8000 budget.