What is the annual opportunity cost of a checking account that requires a minimum balance of...

What is the annual opportunity cost of a checking account that requires a minimum balance of $240 to avoid service charges? Assume an interest rate of 2.5 percent. Round your answer to 2 decimal places.

Solutions

Expert Solution

Annual opportunity cost is the cost of losing interest on the balance which does not pay off interest.

Checking account does not pay interest on the balance available in it unlike saving accounts.

Therefore Annual opportunity cost = Minimum balance * Interest rate = 240 *2.5* = $6.00

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

1. What is not a cost of keeping money in a checking account? A) Transaction fee...

1. What is not a cost of keeping money in a checking account? A) Transaction fee for ATM transaction B) Fees for various services like stop payments C) Minimum balance requirement for free checking D) FDIC insurance 2. You have estimated that you need $6,500 in liquid assets for an emergency fund. You currently have only $1,000, which is invested in a savings account earning 3percent nominal interest, compounded monthly. Your current budget leaves $290per month to apply to this...

Eight percent of customers of a bank keep a minimum balance of $500 in their checking...

Eight percent of customers of a bank keep a minimum balance of $500 in their checking accounts. What is the probability that in a random sample of 100 customers, 10 or fewer keep the minimum balance of $500? (Hint: Normal approximation to binomial distribution is required) 6b) Replacement times for TV sets are normally distributed with a mean of 8.2 years and a standard deviation of 1.1 years, (based on data from “Getting Things Fixed,” Consumer Reports). If you want...

A) Using and representinga balance sheet, show what happens when Bob opens a checking account with...

A) Using and representinga balance sheet, show what happens when Bob opens a checking account with $200 at Bank of America. B) What happens when he opens a checking account with a check from another bank? Show this in a separate balance sheet.

Karim Corp. requires a minimum $8,200 cash balance. Loans taken to meet this requirement cost 1%...

Karim Corp. requires a minimum $8,200 cash balance. Loans taken to meet this requirement cost 1% interest per month (paid monthly). Any excess cash is used to repay loans at month-end. The cash balance on July 1 is $8,600, and the company has no outstanding loans. Forecasted cash receipts (other than for loans received) and forecasted cash payments (other than for loan or interest payments) follow. July August September Cash receipts $ 24,200 $ 32,200 $ 40,200 Cash payments 28,300...

In what sense is the cost of capital an opportunity cost? An opportunity cost to whom?...

In what sense is the cost of capital an opportunity cost? An opportunity cost to whom? And, Is it possible that there could be sources of financing that have a zero cost?

what is opportunity cost?

What is opportunity cost? As scarce resource, financial capital has opportunity cost. What determines the opportunity...

What is opportunity cost? As scarce resource, financial capital has opportunity cost. What determines the opportunity cost of capital? PLEASE ANSWER THIS QUESTION IN A ESSAY FORMAT!

What items should be considered when choosing a checking account?

According to Moebs services, the average cost of an individual checking account to mojor U.S banks...

According to Moebs services, the average cost of an individual checking account to mojor U.S banks was 380 dollars. A bank consultant wants to determine whether the current mean cost was more than 380 dollars a year. A recent random sample of 150 such checking accounts produced a mean of 390 dollars. Assume that the standard deviation is 60 dollars for the annual cost. Find the p-value for this test of hypothesis.Based on this p-value, would you reject the null...

On October 31, 2021, Damon Company's general ledger shows a checking account balance of $8,439

On October 31, 2021, Damon Company's general ledger shows a checking account balance of $8,439. The company's cash receipts for the month total $74,600, of which $71,365 has been deposited in the bank. In addition, the company has written checks for $72,509, of which $71,234 has been processed by the bank. The bank statement reveals an ending balance of $12,749 and includes the following items not yet recorded by Damon: bank service fees of $290, note receivable collected by the bank...

Subjects