Question

In the past, Sam cashed his paycheck each month at Ready Cash, a check cashing service that charges a 5% fee. He recently opened a checking account at Bank of America so he can now deposit and/or cash his paycheck without a fee. If Sam is making $28,500 per year, how much will he save by not going to Ready Cash anymore?

a) $1,425
b) $1,350
c) $1,500
d) $1,275

Answer 1

Sam will save $1,425 annually by not using the check cashing service since he will avoid the 5% fee on his $28,500 income. This amount corresponds to answer option (a).

Step-by-step explanation:

If Sam is making $28,500 per year and uses a check cashing service that charges a 5% fee, we can calculate his savings by not using Ready Cash anymore. First, we determine the total fees paid by taking 5% of his annual income.

Total fees per year = 5% of $28,500 = 0.05 × $28,500 = $1,425

Therefore, by opening a checking account at Bank of America and avoiding the 5% fee per paycheck, Sam will save $1,425 per year.

To answer the student's question directly: If Sam is making $28,500 per year, he will save $1,425 by not going to Ready Cash anymore, which corresponds to answer option (a).