An FI Offers a $2,500 Minimum Balance NOW Account Paying

question 91

Multiple Choice

An FI offers a $2,500 minimum balance NOW account paying 4 percent annual interest, and there are no service charges as long as the customer maintains the minimum balance.The customer maintains a balance of $5,000, and averages 750 checks per year.Each check has a processing cost to the FI of $0.15.What is the annual gross interest return on this account to the customer?

• A)$112.50.
• B)$100.00.
• C)$312.50.
• D)$137.50.
• E)$212.50. Gross return = (avg.balance above minimum × explicit interest rate) + (implicit interest)
• Gross return = [(5,000 × 0.04) + (750 × 0.15)] = (200 + 112.5) = $312.50

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Definitions:

Competitive

Relating to or characterized by competition; having the ability or resources to compete successfully with others.

Imperfectly Competitive

A market structure characterized by few sellers, differentiated products, and barriers to entry, which does not meet the criteria of perfect competition.

Monopoly

A market structure characterized by a single supplier that has exclusive control over a good or service, potentially leading to higher prices and restricted output.

Demand Schedule

A table that shows the quantity of a good or service that consumers are willing and able to purchase at various prices.