Use the Following Information to Answer the Question

question 54

Multiple Choice

Use the following information to answer the question. A current deposit account requires a minimum balance of $500 if annual interest of 5 per cent is to be earned monthly on its deposits. An account holder has maintained an average balance of $300 for the first nine months of the year and $800 for the last three months of the year. She has written an average of 20 cheques a month and is not charged for these services. However, it costs the bank $0.02 to process each cheque.
The bank would like to limit the average return (both explicit and implicit) earned by the account holder to 5 per cent per year. How much should it charge for processing each check to this Account holder assuming that it will pay annual interest of 5 per cent and minimum balances of $200 are maintained?

• A) 1 cent per cheque
• B) 2 cents per cheque
• C) 3 cents per cheque
• D) 4 cents per cheque.

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