You have $6,500 to deposit. If you deposit the money in a savings account at your local bank, you will earn 1.45% 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 2.25% interest, but you will be charged $4 every time you make an ATM withdrawal. Assuming that your ATM withdrawals do not reduce the amount of interest you earn, how many ATM withdrawals must you make in a year for the local savings account to be a better deal than the online savings account?

Question

Mathematics

Gabriella Clark

21 December, 09:23

You have $6,500 to deposit. If you deposit the money in a savings account at your local bank, you will earn 1.45% 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 2.25% interest, but you will be charged $4 every time you make an ATM withdrawal. Assuming that your ATM withdrawals do not reduce the amount of interest you earn, how many ATM withdrawals must you make in a year for the local savings account to be a better deal than the online savings account?

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Answers (1)

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Hershey · Answer 1

Interest in the local bank = 0.0145 x 6500 = $94.25

Interest in the online account = 0.0225 x 6500 = $146.25

For the local bank to be a better deal, let x be the number of withdrawals, then 4x > 146.25 - 94.25

4x > 52

x > 13

Therefore, fore the local bank to be a better deal, he will withdraw about 14 times.