Answer :
To determine the annual opportunity cost of maintaining a minimum balance in a checking account, let's break down the problem step by step.
1. Identify the minimum balance requirement:
The checking account requires a minimum balance of \$300 to avoid service charges.
2. Determine the annual interest rate:
The interest rate given is 3 percent, which can be expressed as 0.03 in decimal form.
3. Calculate the opportunity cost:
The opportunity cost here refers to the potential earnings you forgo by keeping the minimum balance in the checking account instead of investing it elsewhere. This can be calculated using the formula for simple interest:
[tex]\[ \text{Opportunity Cost} = \text{Minimum Balance} \times \text{Interest Rate} \][/tex]
4. Substitute the given values into the formula:
[tex]\[ \text{Opportunity Cost} = 300 \times 0.03 \][/tex]
5. Perform the multiplication to find the opportunity cost:
[tex]\[ 300 \times 0.03 = 9.0 \][/tex]
Therefore, the annual opportunity cost of maintaining a \[tex]$300 minimum balance in a checking account with a 3 percent interest rate is \$[/tex]9.
The correct answer is:
[tex]\[ \$9 \][/tex]
1. Identify the minimum balance requirement:
The checking account requires a minimum balance of \$300 to avoid service charges.
2. Determine the annual interest rate:
The interest rate given is 3 percent, which can be expressed as 0.03 in decimal form.
3. Calculate the opportunity cost:
The opportunity cost here refers to the potential earnings you forgo by keeping the minimum balance in the checking account instead of investing it elsewhere. This can be calculated using the formula for simple interest:
[tex]\[ \text{Opportunity Cost} = \text{Minimum Balance} \times \text{Interest Rate} \][/tex]
4. Substitute the given values into the formula:
[tex]\[ \text{Opportunity Cost} = 300 \times 0.03 \][/tex]
5. Perform the multiplication to find the opportunity cost:
[tex]\[ 300 \times 0.03 = 9.0 \][/tex]
Therefore, the annual opportunity cost of maintaining a \[tex]$300 minimum balance in a checking account with a 3 percent interest rate is \$[/tex]9.
The correct answer is:
[tex]\[ \$9 \][/tex]
