Question

You want to open a new checking account and can deposit $150 dollars into the account to open it. You also plan on writing about 6 to 8 checks a month from the account. Which of the following banks would you choose to open the account with? Why? Bank A charges a $6 per month fee when the balance is below $500.00, there are no check fees. Bank B has no monthly fee and charges .50 cents for each check over three. Bank C charges a $3 per month fee and charges .25 cents for each check you write.

Answer 1

Answer: You deposit $292.31 in August.

Step-by-step explanation:

So you deposit $150 in January and 10% more as each month passes by, which if you count, that would be 7 months. When it comes to compound interest, the formula for it is P(1 + r)^t. That means r = interest rate, P = principal, and t = time. In this case, we add 1 to 10% in decimal for. 10% is 0.1 in decimal form. 1 + 0.1 is 1.1. Now, compound 1.1 to the 7th power, because you repeat this 7 times. 1.1^7 is 1.9487171. Don't delete the decimal from your calculator. Now, multiply that decimal by 150 to get the new amount. When you do, you get 292.307565 or 292.31 when rounded to the nearest hundredth. You deposit $292.31 in August. Hope that helps!

Answer 2

Bank A:

Monthly fee: $6 (since the balance is below $500)
Check fees: $0
Total fees (6-8 checks): $6
Bank B:

Monthly fee: $0
Check fees: $0.50 per check for checks 4 to 8 (3 checks are free)
6 checks: (6 - 3) * $0.50 = $1.50
8 checks: (8 - 3) * $0.50 = $2.50
Total fees (6-8 checks): $1.50 to $2.50
Bank C:

Monthly fee: $3
Check fees: $0.25 per check
6 checks: 6 * $0.25 = $1.50
8 checks: 8 * $0.25 = $2.00
Total fees (6-8 checks): $4.50 to $5.00
Based on the analysis, Bank B would be the best choice in this scenario. With no monthly fee and a charge of only $0.50 per check over the first three checks, Bank B's total fees for writing 6 to 8 checks per month range from $1.50 to $2.50, which is lower than the fees associated with Banks A and C.