Question

A person is required to keep a $300 balance for a free checking account. What would be the amount of lost interest over five years if the person could earn
4 percent on savings in another type of account?

Answer 1

The amount lost by the person as interest over five years is  $65

Explanation:

Given information's are

Amount = $300

years  =  Five years

Interest rate = 4 percent

If that person deposits $300 in to a saving account which gives 4% interest per year will get $365 after completion of five year period as follows..,

Usually bank follows compound interest method for five years holding of  deposits in the savings accounts.The compound interest formula is ((P×(1+i)^n) - P),

where

P is the principal,

i is the annual interest rate, and

n is the number of periods

Interest = $300 ×(1+0.04)5 - $300 = $65

$Interest = 300 ×(1+0.04)5 - 300 = 65$

So.,the amount lost by the person as interest over five years is  $65