Answered

Terrell has \$300 to open a checking account. He plans to use the ATM four times per month at his local branch. He does not overdraft his account.



\begin{table}

\captionsetup{labelformat=empty}

\caption{Bank Account Terms and Conditions}


ABCD

Minimum Balance		\$500\$250\$300\$100

Interest		0.2\%0\%0.02\%0\%

Overdraft Fees		\$0 if linked with savings account or \$40 per overdraft\$35 per overdraft\$25 per overdraft\$25 per overdraft

ATM Usage/Fees		\$0 for all ATMs\$0 for ABC bank ATMs \$3 for nonABC bank ATMs\$4 per transaction\$3 per transaction

\$10 or




\end{table}

Verified Answer :

  • Evaluate eligibility based on a \(\$300\) starting balance, excluding Bank A because it requires \(\$500\).
  • Calculate the monthly financial net value (Interest - Fees) for the eligible Banks B, C, and D based on 4 ATM transactions.
  • Compare the net values: Bank B (\(\$0\)), Bank C (-\(\$15.94\)), and Bank D (-\(\$12\)).
  • Determine that Bank B is the most cost-effective option, resulting in a net cost of \(\boxed{\text{B}}\).

Explanation

  1. Eligibility Analysis

We evaluate each bank based on the minimum balance requirement of \(\$300\).

  • Bank A: Requires \(\$500\). Since Terrell has \(\$300\), Bank A is ineligible.
  • Bank B: Requires \(\$250\). Since \(\$250 \le \$300\), Bank B is eligible.
  • Bank C: Requires \(\$300\). Since \(\$300 \le \$300\), Bank C is eligible.
  • Bank D: Requires \(\$100\). Since \(\$100 \le \$300\), Bank D is eligible.
  1. Financial Assessment

Next, we calculate the net monthly gain or loss for each eligible bank, considering interest earned and ATM fees for four transactions per month at his local branch.

  • Bank B:
  • ATM fees: \(4 \times \$0 = \$0\).
  • Interest: \(0\% \text{ of } \$300 = \$0\).
  • Net: \(\$0 - \$0 = \$0\).
  • Bank C:
  • ATM fees: \(4 \times \$4 = \$16\).
  • Interest: \(0.02\% \text{ of } \$300 = 0.0002 \times \$300 = \$0.06\).
  • Net: \(\$0.06 - \$16 = -\$15.94\).
  • Bank D:
  • ATM fees: \(4 \times \$3 = \$12\).
  • Interest: \(0\% \text{ of } \$300 = \$0\).
  • Net: \(\$0 - \$12 = -\$12\).
  1. Conclusion

Comparing the results:

  • Bank B: \(\$0\)
  • Bank C: \(-\$15.94\)
  • Bank D: \(-\$12\)

Since Bank B has the highest net monthly value (\(\$0\)), it is the most advantageous choice for Terrell.

Examples

Understanding bank terms is essential for personal finance management. Just as we compared the fees and interest rates to find the best bank for Terrell's \(\$300\) initial deposit, you can use similar logic to compare different credit cards, loan interest rates, or investment accounts. By calculating the total cost (fees) versus the total benefit (interest or rewards) over a specific time period, you can always choose the option that best protects your money.

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