Question

question 7 of 10
mikes checking account pays 0.5% interest monthly and has a $7.50 service fee. if mikes balance last month was $1423, find the amount of credit or debit to his account after interest and service fee are both applied.

a. credit of $7.50

b. debit of $7.12

c. debit of 39 cents

d. credit of 39 cents

Explanation:

Step1: Calculate Monthly Interest

First, find the monthly interest. The formula for simple interest is \( I = P \times r \), where \( P \) is the principal amount, and \( r \) is the monthly interest rate (in decimal).
Given \( P = \$1423 \) and \( r = 0.5\% = 0.005 \).
So, \( I = 1423 \times 0.005 = \$7.115 \approx \$7.12 \).

Step2: Compare Interest and Service Fee

The service fee is \( \$7.50 \), and the interest earned is \( \$7.12 \).
To find the net effect, subtract the interest from the service fee: \( 7.50 - 7.12 = \$0.38 \approx \$0.39 \) (39 cents).

Since the service fee (\$7.50) is greater than the interest earned (\$7.12), Mike’s account has a debit (he owes the bank the difference). Thus, the net debit is 39 cents.

Answer:

C. Debit of 39 cents