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The bank you use cost Kshs.500,000 per month. You have Kshs.100 million average balance at the bank, on which the bank gives you earnings credits

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The bank you use cost Kshs.500,000 per month. You have Kshs.100 million average balance at the bank, on which the bank gives you earnings credits of 0.4% per month. Required: Is your compensating balance sufficient to cover your service charges? If not, how much additional money do you owe the bank? ii) What minimum compensating balance would cover your Kshs.500,000 service charge? (10 marks) Page 2 of 4

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