You have $3,750 to deposit. If you deposit the money in a savings account at your local bank, you will earn 1.75% annual interest and will be able to make ATM withdrawals at your bank's ATMs. If you deposit the money in an online savings account, you will earn 3.25% interest, but you will be charged $4 every time you make an ATM withdrawal. Assuming that your ATM withdrawals do not reduce the amount of interest you earn, roughly how often must you make an ATM withdrawal for the local savings account to be a better deal than the online savings account?

Question

Mathematics

Clay Krause

7 May, 17:55

You have $3,750 to deposit. If you deposit the money in a savings account at your local bank, you will earn 1.75% annual interest and will be able to make ATM withdrawals at your bank's ATMs. If you deposit the money in an online savings account, you will earn 3.25% interest, but you will be charged $4 every time you make an ATM withdrawal. Assuming that your ATM withdrawals do not reduce the amount of interest you earn, roughly how often must you make an ATM withdrawal for the local savings account to be a better deal than the online savings account?

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Fly · Answer 1

Interest in the local bank = 0.0175 x 3750 = $65.63

Interest in the online account = 0.0325 x 3750 = $121.88

For the local bank to be a better deal, let x be the number of withdrawals, then 4x > 121.88 - 65.63

4x > 56.25

x > 14.06

Therefore, fore the local bank to be a better deal, he will withdraw about 15 times.