An FI offers a $2,500 minimum balance NOW account paying 4 percent annual interest,and there are no service charges as long as the customer maintains the minimum balance.The customer maintains a balance of $5,000,and averages 750 checks per year.Each check has a processing cost to the FI of $0.15.What is the annual gross interest return on this account to the customer?
A)$112.50.
B)$100.00.
C)$312.50.
D)$137.50.

Question

Quizplus · Accepted Answer

Gross return = (avg. balance above minimum * explicit interest rate) + (implicit interest)
Gross return = [(5,000 F1F1F1S1F1F1F10 0.04)+ (750 F1F1F1S1F1F1F10 0.15)] = (200 + 112.5)= $312.50.

An FI Offers a $2,500 Minimum Balance NOW Account Paying