Answer to Question #297319 in Statistics and Probability for aaaa

Question

. You open a checking account. You are paid 3% interest on the average balance but are charged a 7 monthly charge. Assuming that interest is paid monthly regardless of the number of days in the month, calculate the average daily balance you must maintain to offset the 7 monthly charge.

Answer 1

Define p = ( I )/ ( RT ) where p is the principal , R is the rate and T is the time

substituting in the above formula we have

p = ( 7 )/ ( 0.03 * (1/12) )

Hence p = (7/ 0.0025 ) = $2800 which is the required average daily balance that must be maintained.