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

Answer:

$49,950

Explanation:

X = amount in account

Make (x times the interest rate) equal to the $9.99 you will need to earn to cover the fee.

.02%* x = 9.99

.0002x= 9.99 (Divide both sides by .0002)

x = $49,950

With such a small interest rate, you will need to have a large sum of money in order to earn enough to cover the fee.

Answer 2

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

Further Explanation:  

Saving account:

Saving account refers to the interest-bearing account where the bank pays a very low interest rate. The funds are easy to access to the account holder. Generally, the numbers of withdrawals in a month are limited. The interest earned on the saving account is subject to income tax. The bank does not charge for the maintenance of the saving account. The saving account provides the safety and nominal return on the funds.  

Calculate the principle value:

The interest rate is 0.02% or 0.0002 and the minimum balance requirement is $9.99. The account holder has to maintain the balance which would earn the interest equal to the Minimum-Balance Fee. The principle value can be determined 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 requirement to recover the Minimum-Balance Fee is $49,950.

Learn More:

1. Learn more about the investments

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2. Learn more about the high level of supplies

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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.