A NOW Account Requires a Minimum Monthly Balance of $500

Multiple Choice

A NOW account requires a minimum monthly balance of $500 if annual interest of 5 percent 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 checks a month and is not charged for these services.However, it costs the bank $0.02 to process each check. What is the average return earned (both explicit and implicit) by the account holder over the full year if the minimum balance is reduced to $200?

A) 2.01 percent.
B) 2.65 percent.
C) 3.78 percent.
D) 5.35 percent.
E) 6.13 percent.