Lucky Louie's Bank Requires a Minimum Balance at All Times

question 77

Multiple Choice

Lucky Louie's bank requires a minimum balance at all times of $1500 in order to provide free checking services. The bank pays .5% per annum interest on the minimum balance. If you do not maintain the balance, account service fees are $4 per month. Assuming Lucky can earn 2.5% on his money not sitting at the bank, what is his net benefit to maintaining the minimum balance?

• A) Not a benefit; he should invest his money elsewhere at 2.5%
• B) $18 per year benefit
• C) $48 per year benefit
• D) Breakeven

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Definitions:

Consumer Surplus

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is the difference between the maximum price a consumer is willing to pay for a good or service and the actual price they pay.

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