R&R Savings Bank finds that its basic transaction account, which requires a $1,000 minimum balance, costs this savings bank an average of $3.25 per month in servicing costs (including labor and computer time) and $1.25 per month in overhead expenses. The savings bank also tries to build in a $0.50 per month profit margin on these accounts. What monthly fee should the bank charge each customer?
Further analysis of customer accounts reveals that for each $100 above the $1,000 minimum in average balance maintained in its transaction accounts, R&R Savings saves about 5 percent in operating expenses with each account. (Note: If the bank saves about 5 percent in operating expenses for each $100 held in balances above the $1,000 minimum, then a customer maintaining an average monthly balance of $1,500 should save the bank 25 percent in operating costs.) For a customer who consistently maintains an average balance of $1,200 per month, how much should the bank charge in order to protect its profit margin?

  • CreatedOctober 31, 2014
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