The Hollingsworth National Bank maintains an average clearing balance of $7,000,000 with the Federal Reserve.The Federal Funds rate is currently 5.25 percent.What is the credit the bank will earn over the maintenance period that can be used to offset any fees charged by the Federal Reserve?
A)$367,500
B)$1,021
C)$14,292
D)$30,625
E)None of the options is correct

Question

Quizplus · Accepted Answer

The credit earned is calculated by multiplying the average balance by the Federal Funds rate: $7,000,000 * 5.25% = $367,500 annually. To find the credit for the maintenance period (usually 14 days), divide by 365 and multiply by 14: ($367,500 / 365) * 14 = $14,292.

The Hollingsworth National Bank Maintains an Average Clearing Balance of $7,000,000