An MMDA account has a minimum balance requirement of $ 1 , 0 0 0 and the
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An MMDA account has a minimum balance requirement of $ and the depositor can have a maximum of checks or transfers from the account each month. The bank pays percent interest on the entire account balance but it costs $ to process each check or transfer. There is also a monthly cost for statements and other account maintenance of $ The bank does charge an annual account fee of $ each January. Assume that the customer writes checks each month and keeps an average balance of $
a What explicit interest does the account holder earn each year?
b What is the implicit interest that the bank absorbs each year?
c What is the average annual return to the customer each year?
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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