18-96 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?

Question

Quizplus · Accepted Answer

The customer earns 4% interest on the $5,000 balance, which is $200.

The customer writes 750 checks per year with a processing cost of $0.15 per check, so the total processing cost for the FI is:

750 x $0.15 = $112.50

Therefore, the customer's annual gross interest return on this account is:

$200 - $112.50 = $87.50

However, since there are no service charges as long as the customer maintains the minimum balance, the customer can consider the full $87.50 as the gross interest return.

Therefore, the correct answer is C) $312.50.

18-96 an FI Offers a $2,500 Minimum Balance NOW Account