R&R Savings Bank finds that its basic transaction account, which requires a $1000 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. Further analysis of customer accounts reveals that for each $100 above the $500 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 $500 minimum, then a customer maintaining an average monthly balance of $1.000 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? O 5.00 24M -0.32 O 325

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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R&R Savings Bank finds that its basic transaction account, which requires a $1000 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.
Further analysis of customer accounts reveals that for each $100 above the $500 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 $500 minimum, then a customer maintaining
an average monthly balance of $1,000 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?
05.00
4.68
O 0.32
325
Transcribed Image Text:R&R Savings Bank finds that its basic transaction account, which requires a $1000 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. Further analysis of customer accounts reveals that for each $100 above the $500 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 $500 minimum, then a customer maintaining an average monthly balance of $1,000 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? 05.00 4.68 O 0.32 325
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