1.A cheque account requires a minimum balance of $750 for interest to be earned at an annual...
Question:
1.A cheque account requires a minimum balance of $750 for interest to be earned at an annual rate of 4 per cent. An account holder has maintained an average balance of $500 for the first six months and $1000 for the remaining six months. The account holder writes an average of 60 cheques per month and pays $0.02 per cheque, although it costs the bank $0.05 to clear a cheque.
What average return does the account holder earn on the cheque account?
What is the average return if the bank lowers the minimum balance to $400?
What is the average return if the bank pays interest only on the amount in excess of $400? Assume that the minimum required balance is $400.
How much should the bank increase its cheque fee to the account holder to ensure that the average interest it pays on this account is 5 per cent?
Assume that the minimum required balance is $750. LO 15.4
Step by Step Answer:
Financial Institutions Management A Risk Management
ISBN: 9781743073551
4th Edition
Authors: Helen Lange, Anthony Saunders, Marcia Millon Cornett