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You have the option of paying by fees or compensating balances for your bank fees....

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Finance

You have the option of paying by fees or compensating balances for your bank fees. The following information about your account is provided:

Average Ledger Balance $1,500,000 Deposit Float $150,000 Reserve Requirement 10% Earnings Credit Rate 1.5% Services charges for the month $1,425 Days in the month 30

How much is the earnings credits for the month? Is it enough to cover the service charges? For what reason would you not want to have earnings credits used to pay for your bank fees, but rather just pay outright to the bank and reduce your balances?

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