A DI Offers a $500 Minimum Balance NOW Account Paying

question 57

Multiple Choice

A DI offers a $500 minimum balance NOW account paying 5.5 percent annual interest.The account has a service charge of $0.05 per check, and processing costs per check are $0.15.The customer maintains a balance of $1,000, and averages 150 checks per year.What is the annual gross interest return on this account to the customer?

• A)$22.50.
• B)$70.00.
• C)$15.00.
• D)$55.00.
• E)$7.50. Gross interest return = [(avg.balance above minimum × explicit interest rate) + (implicit interest)]/avg.balance
• GIR = (1,000 × 0.055) + (150 × (0.15 − 0.05)) = $55.00 + $15.00 = $70.00