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Abed carries an average monthly balance of $800 in his checking account. If his bank charges $9.00 per month as a minimum service fee, how much in annual interest must Abed earn to cover the monthly fee?

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hyderali230

Answer:

Abed must earn 13.5% or $108 annual interest to cover the monthly fee.

Explanation:

Abed should earn minimum $9 of interest on deposit each month to cover the  bank charges expense.

Average Monthly Balance = $800

Bank Charges = $9.00 per month

Monthly interest rate = (Monthly bank charges / Monthly average balance ) x 100

Monthly interest rate = ( $9.00 / $800 ) x 100 = 0.01125 x 100 = 1.125%

Annual Interest rate = 0.01125 x 12 = 0.135 = 13.5%

Annual Interest = $800 x 13.5% = $108

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