Question

Sampson is a college sophomore who wants to open a savings account so he can save $50 per paycheck toward spring break in March. Account A offers an interest rate of 0.75% and no fees. Account B offers an interest rate of 1% and a low balance fee every month the account dips below $2500. Which account is a better option for Sampson? *​

Answer 1

Account A is a better option for Sampson because it offers a reasonable interest and there are no fees charged.

Explanation:

We are told that Account A offers an interest rate of 0.75% and no fees while Account B offers an interest rate of 1% and a low balance fee every month the account dips below $2500.

Now, from the above statement, it is clear that Account A offers an interest rate with no fees while Account B offers an interest with fees.

Now, account A will be better because it is a direct savings which he can project the total sum he will have by spring in March since there are no fees deducted whereas for Account B, though it has a slightly higher interest rate, it wouldn't be a better option for him because a fee is deducted from his balance every month the account dips below $2500. Which means before he gets more than $2500, he would have gotten deductions every month up till then which means ultimately less profit than Account A.

Thus, Account A is a better option for Sampson because it offers a reasonable interest and there are no fees charged.