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

$50,000

Explanation:

We are given;

the interest rate per annum = 0.02%

Time = 1 year

P = ?

SI = $ 9.99 ≈ $10

We know the formula for simple interest = P x R x T/100

Therefore, substituting the values of SI, R and T into this formula to get:

10 = P x 0.02 x 1/100

P = 10 / 0.0002 = 50000

P = $50,000

Therefore, a minimum of $50,000 is to be kept in the account for 1 year to earn enough interest.

Answer 2

At first glance, this problem might be overwhelming so try approaching it slowly by doing these steps:

Step 1: Start by understanding what the problem is really asking.
You might notice that the problem is just a percentage problem, with a twist! If you still don't see it, the problem is just asking what the base should be given a percentage and the amount.

Step 2: Recall the concepts relevant to the question.
We can identify a single formula that will be important in getting the answer:

`base*percent=amount`

Step 3: Apply the concept to the context of the problem.
You'll see that we already have the percent from the interest rate which is 0.02% and the amount from the below-minimum-balance fee which is $9.99.

There goes the little twist: you have to manipulate the equation to get the base. Dividing both sides of the equation by the percent we'll have:

`base= (amount)/(percent)`

Step 4: Evaluate to get the answer to the problem.
We simply substitute the given numbers and evaluate.

`base= (percent)/(amount)= (9.99)/(0.0002) =49,950`

Answer: You need $49,950 in the account to cover the Below-Minimum-Balance Fee from your interest.