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4 October, 19:14

Abed carries an average monthly balance of $800 in his checking account. If his bank charges $9.00 per month as a minimum service fee, how much in annual interest must Abed earn to cover the monthly fee?

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  1. 4 October, 21:00
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    Abed must earn 13.5% or $108 annual interest to cover the monthly fee.

    Explanation:

    Abed should earn minimum $9 of interest on deposit each month to cover the bank charges expense.

    Average Monthly Balance = $800

    Bank Charges = $9.00 per month

    Monthly interest rate = (Monthly bank charges / Monthly average balance) x 100

    Monthly interest rate = ($9.00 / $800) x 100 = 0.01125 x 100 = 1.125%

    Annual Interest rate = 0.01125 x 12 = 0.135 = 13.5%

    Annual Interest = $800 x 13.5% = $108
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