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Homework Problems (40 points)

  1. Miguel pays monthly banking  fees of $16 for his checking account. If he continues with this account  for 6 years, calculate the total cost of these banking fees over this  period.
  2. A payday loan company charges a $60 fee for a $1,000 two-week loan. Calculate the annual interest rate this represents.
  3. Calculate the following for  these savings scenarios: a) The value of a savings account started with  $700, earning 4 percent interest compounded annually after 10 years. b)  If Brenda Young wants to have $15,000 in 5 years and can earn 8 percent  on her investments, how much should she deposit now as a single payment?  c) If someone deposits $1,800 annually into an account earning 8  percent, how much would they have after 30 years?
  4. Complete the bank reconciliation with the following information: 
    • Bank statement balance: $680
    • Outstanding checks: $112
    • Deposit in transit: $60
    • Checkbook balance: $642
    • Bank fees: $12
    • ATM withdrawals not recorded in checkbook: $80
    • Interest earned: $8
    • Direct deposits not recorded in checkbook: $70
    • Calculate both the adjusted bank balance and the adjusted checkbook balance to verify they match.

Case Analysis: Financial Services Options (30 points)

Read the following case study and answer the questions below:

Case Study:

The Johnson family is evaluating different  financial services options. They are considering mobile banking, prepaid  debit cards, and check-cashing outlets as alternatives to traditional  banking services. The family consists of two working parents with  moderate income and two teenage children. They live in a suburban area  with access to various financial institutions, but they frequently  travel for their children’s sporting events and have busy schedules.

They are concerned about convenience,  costs, security, and having appropriate financial services that meet  their specific needs. The family currently maintains a checking account  but finds the minimum balance requirements and monthly fees challenging.  One family member previously experienced identity theft, making them  particularly concerned about privacy and security issues.

Questions:

R1. Analyze the benefits and drawbacks of  each financial service option (mobile banking, prepaid debit cards, and  check-cashing outlets) for the Johnson family.

R2. What factors should the Johnson family  consider when selecting a financial institution or service? Include both  general considerations and factors specific to their situation.

R3. What research actions would you  recommend the Johnson family take before making their decision? Include  how they should address security concerns.

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