Question

If the interest rate on a savings account is 0.02%, approximately how much money do you need to keep in this account for 1 year to earn enough interest to cover a single $9.99 Below-Minimum-Balance Fee?

Answer 1

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Answer 2

The amount required to recover the Minimum-Balance Fee is $49,950.

Further Explanation:  

Below-Minimum-Balance Fee:

Below-Minimum-Balance Fee refers to the amount that the account holder has to maintain in the bank account. If the account holder is not able to maintain the minimum balance, the bank will charge the account holder a fee. This fee is known as a below-minimum-balance fee. The bank imposes the below-minimum-balance fee to secure a minimum balance so that it could use the funds in the further investment activities.  

Calculate the principal value:

The interest rate on the savings account is 0.02% or 0.0002. The fee for not maintaining the minimum balance is $9.99. The account holder has to deposit the funds that would earn enough interest to recover the below-minimum-balance fee.  The calculation of the required principal value is as follows:

\begin{aligned}\text{Principle}&=\frac{\text{Minimum balance requirement}}{\text{Interest rate}}\\&=\frac{\$9.99}{0.0002}\\&=\$49,950\end{aligned}

Thus, the amount required to recover the Minimum-Balance Fee is $49,950.

Learn More:

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3. Learn more about the expenses  

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Answer Details:

Grade: Senior school

Chapter: Banking

Subject: Economics  

Keywords: interest rate, savings, account, 0.02%, approximately, money, you, need, keep, account, one, year, earn, enough, interest, cover, single, $9.99, Below-Minimum-Balance Fee.