Determine the annual net cost of these checking accounts: a. Monthly fee $ 4, check- processing fee of 20 cents, average of 23 checks written per month b. Annual interest of 2.5 percent paid if balance exceeds $ 750, $ 8 monthly fee if account falls below minimum balance, average monthly balance $ 815, account falls below $ 750 during four months
A is $103.20 but as for B the question doesn't make sense because there isn't enough information. Is $750 the minimum balance? Is the account below $750 at the time that he would be available for the annual interest?
To determine the annual net cost of these checking accounts, we need to calculate the total cost incurred over a year and subtract any interest earned or fee reductions. Let's break down the calculations for each checking account:
a. Monthly fee $4, check-processing fee of 20 cents, average of 23 checks written per month:
- Monthly fee: $4 x 12 months = $48 per year
- Check-processing fee: $0.20 x 23 checks x 12 months = $55.20 per year
To get the annual net cost, we sum up these costs: $48 + $55.20 = $103.20 per year.
b. Annual interest of 2.5 percent paid if balance exceeds $750, $8 monthly fee if account falls below the minimum balance, average monthly balance $815, the account falls below $750 during four months:
- Interest earned: $815 x 2.5% = $20.38 per year (since the average monthly balance exceeds $750)
- Monthly fee for falling below the minimum balance: $8 x 4 months = $32 per year
To get the annual net cost, we subtract the interest earned and add the fee for falling below the minimum balance: $103.20 - $20.38 + $32 = $114.82 per year.
Therefore, the annual net cost for the checking account in scenario a is $103.20, and for the checking account in scenario b is $114.82.