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Question
A NOW account requires a minimum monthly balance of $500 if annual interest of 5 percent is to be earned monthly on its deposits. An account holder has maintained an average balance of $300 for the first nine months of the year and $800 for the last three months of the year. She has written an average of 20 checks a month and is not charged for these services. However, it costs the bank $0.02 to process each check.
What is the average return (both explicit and implicit) earned by the account holder if the bank pays interest on only the amounts in excess of the required minimum of $200?
A. 2.01 percent.
B. 2.65 percent.
C. 3.78 percent.
D. 5.35 percent.
E. 6.13 percent.
Answer
This answer is hidden. It contains 49 characters.
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