Question

You open a checking account. You are paid 3% interest on the average daily balance, but are charged a $4 monthly charge. Assuming that interest is paid monthly (regardless of the number of days in the month), calculate the average balance you must maintain to offset the $4 monthly charge.

Answer 1

P= 1/RT = $4/ 3% * 1/12 = $4/.03 * 1/ 12 = $4/.0025

You must maintain an average balance of $1,600.

Answer 2

I = P*r*t
4 = P*0.03*(1/12)
P = 48/.03 = 1600

Your average daily balance must be $1600 to offset the fee.