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22 September, 12:44

A bank that provides overdraft protection charges 7 percent for each $100 (or portion of $100) borrowed when an overdraft occurs.

a. What amount of interest would the customer pay for an overdraft of $240?

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Answers (2)
  1. 22 September, 14:55
    0
    Interest = (100 + 100 + 100) * 0.07 = $21

    The answer reflects 3 increments of $100

    Explanation:

    Overdraft which is essentially the extension of credit from a bank when an account balance reaches zero. The credit extension allows the accountholder to continue withdrawing money from the account, despite its zero balance.
  2. 22 September, 15:44
    0
    The customer would pay $14 for the overdraft

    Explanation:

    The overdraft interest can be calculated by considering the interest on the automatic loan which would be triggered by the overdraft.

    Given

    Overdraft protection charges = 7 % = 0.07

    Overdraft = $240

    The automatic loan is the sum on the loan and also the sum triggered by overdraft.

    Automatic loan = $100 + $100 = $200

    Overdraft interest = 0.07 x $200

    = $14

    Therefore the customer would pay $14 for the overdraft
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