Question

In the month of July (31 days), a company had an available balance in their deposit account of $4,126,000 and service charges of $2,500. If the ECR for the month was 45 bp (0.45%), and the reserve requirement of 10%, how much will the company owe the bank in hard dollar fees, after adjustment for earnings credit

Answer 1

The amount that the company owe the bank in hard dollar fees, after adjustment for earnings credit is:$1081.

Amount owe after adjustment

Using this formula

Amount owe=Service charges-(Deposit balance×(1-Reserve requirement)×ECR× Number of days/Number of days in a year)

Let plug in the formula

Amount owe = 2500 - (4126000× (1-.10)×0.45%×31/365)

Amount owe = 2500 - (4126000×.90×0.45%×31/365)

Amount owe=2500-1,419

Amount owe =$1081

Therefore the amount that the company owe the bank in hard dollar fees, after adjustment for earnings credit is:$1081.

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