You open a checking account. You are paid 3% interest on the average daily balance, but are charged a $4 monthly charge. Assuming that interest is paid monthly (regardless of the number of days in the month), calculate the average balance you must maintain to offset the $4 monthly charge.

Question

Gideon

14 December, 08:23

+1

Answers (2)

Know the Answer?

Daniella Weaver · Answer 1

I = P*r*t

4 = P*0.03 * (1/12)

P = 48/.03 = 1600

Your average daily balance must be $1600 to offset the fee.

Brenton Cantu · Answer 2

P = 1/RT = $4 / 3% * 1/12 = $4/.03 * 1 / 12 = $4/.0025

You must maintain an average balance of $1,600.