Question

Week 5 Quiz - Saving (15pts) 1. If the interest rate on a savings account is 0.01%, 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

In order to calculate the minimum amount required, we will first round the below-minimum-balance fee to $10. Next, we will use the equation:
A = I * (IR)^n, where A is the amount after n years and I is the initial investment and IR is the interest rate per year.
10 = I*(0.0001)^1
I = $100,000
$100,000 must be in the account to cover the minimum fees.