Multiple Choice
Michelle has maintained an average balance of $300 per month for the first three months of the year,$800 per month for the next three months,and $1,000 per month for the final six months of the year in a NOW account.It requires a minimum balance of $500 to be maintained if annual interest of 5 percent is to be earned.She writes an average of 25 checks per month but the account does not have a service charge for checks although it costs the bank 10 cents to process each check.
What is the average return (explicit and implicit) earned by her if the bank pays interest only on the amounts in excess of the required minimum of $500?
A) 9.01%.
B) 7.56%.
C) 6.93%.
D) 5.97%.
Correct Answer:
Verified
Correct Answer:
Verified
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