Question: Determine the average monthly cost of servicing the typical student s
Determine the average monthly cost of servicing the typical student’s demand deposit account, which generates 27 withdrawals (15 electronic), two transit checks deposited, two transit checks cashed, two deposits (one electronic), and one on us check cashed per month. Assume there is one account maintenance charge for an account in which checks are not returned and that net indirect expenses apply. Assume that the bank can invest 85 percent of the deposit balance at 4 percent and charges the student $ 3.50 in fees monthly. What is the break- even deposit balance the bank must hold for its revenues to cover its costs? Project: Use the information in Exhibit 10.4 and your answers to Question 3 to assess your account relationship with your bank. Compare your average balance with the break even balance you calculate, and determine whether your account would be profitable to the bank. What is your bank’s “not sufficient funds” (NSF) charge and how will these fees influence account profitability?
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