Question

You have $5,400 to deposit. If you deposit the money in a savings account at your local bank, you will earn 1.49% annual interest and will be able to make ATM withdrawals at your bank’s ATMs. If you deposit the money in an online savings account, you will earn 4.44% annual interest, but you will be charged $5 every time you make an ATM withdrawal. Assuming that your ATM withdrawals do not reduce the amount of interest you earn, roughly how many times a year can you make an ATM withdrawal in order for the local savings account to be a better deal than the online savings account?

Answer 1

32

Explanation:

Answer 2

Annual interest if someone deposits the money at the local savings account:
I 1 = 5,400 * 0.0149 = $80.46
Annual interest if someone deposits the money in an online savings account:
I 2 = 5,400 * 0.0444 = $239.76
I 2 - I 1 = $159.3
159.3 : 5 = 31.86
Answer:
You can make an ATM withdrawal 32 times in order for the local savings account to be better deal than the online savings account.