Question

Michelle has maintained an average balance of $300 per month for the first three months of the year, $800 per month for the next three months, and $1,000 per month for the final six months of the year in a NOW account. It requires a minimum balance of $500 to be maintained if annual interest of 5 percent is to be earned. She writes an average of 25 checks per month but the account does not have a service charge for checks although it costs the bank 10 cents to process each check.

What is Michelle's annual gross interest return?

$35.
       $30.
       $65.
       $55.
       $70.

Answer 1

Month	Balance
1
2
3
4	$        800.00
5	$        800.00
6	$        800.00
7	$     1,000.00
8	$     1,000.00
9	$     1,000.00
10	$     1,000.00
11	$     1,000.00
12	$     1,000.00
Total	$     8,400.00
Divided by	12
Average balance	$        700.00
× interest rate	5%
Gross interest	$          35.00

For the first three months minimum balance is not maintained to earn interest.

Gross interest revenue is $35

Answer is $35