Comparing Costs of Checking Accounts. What would be the net annual cost of the following checking accounts? a. Monthly fee, $2.95; processing fee, $0.35 per check; checks written, an average of 31 a month. b. Interest earnings of 7 percent with a $650 minimum balance; average monthly balance, $700; monthly service charge of $16 for falling below the minimum balance, which occurs three times a year (no interest earned in these months). Solution: a. (31 checks * 12 months * $0.35) + (2.95 * 12 months) = 130.20 + $35.40 = $165.60 b. $700 * .07 = $49 * 9/12 (nine months out of twelve months the minimum balance is met) = $36.75 – (16*3) this is the service charge for the three months below the minimum balance = $11.25 net cost

Comparing Costs of Checking Accounts. What would be the net annual cost of the following checking accounts? a. Monthly fee, $2.95; processing fee, $0.35 per check; checks written, an average of 31 a month. b. Interest earnings of 7 percent with a $650 minimum balance; average monthly balance, $700; monthly service charge of $16 for falling below the minimum balance, which occurs three times a year (no interest earned in these months). Solution: a. (31 checks * 12 months * $0.35) + (2.95 * 12 months) = 130.20 + $35.40 = $165.60 b. $700 * .07 = $49 * 9/12 (nine months out of twelve months the minimum balance is met) = $36.75 – (16*3) this is the service charge for the three months below the minimum balance = $11.25 net cost

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter4: Managing Your Cash And Savings

Section: Chapter Questions

Problem 5FPE: Calculating the net costs of checking accounts. Determine the annual net cost of these checking...

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