Dominion Bank also pays 3.25% annual interest, compounded daily. If you had the following deposits and withdrawals, calculate the amount of interest you would have earned at Dominion bank during the month of March. (March has 31 days) DATE ACCOUNT ACTIVITY BALANCE

March 1 beginning balance $6,500
March 16 withdraw $1,500
March 28 deposit $700

a. $8.69
b. $5.35
c. $33.36
d. $16.08

Option D. $16.08

Explanation:

The balance $6,500, $5,000 ($6500-$1500) and $5,700 ($5000+$700) was outstanding for 15, 12  and 4 days.

So now we will calculate the interest earned during the outstanding period for each monetary amount. The formula to compute interest is given as under:

Effective interest = Amount * [(1 + Annual Interest rate / 365)^Days - 1]

Here,

Amount is $6500

Annual Interest rate is 3.25% and Days are 15.

So by putting values, we have:

Effective interest = $6,500 * [(1 + 3.25% / 365)^15 - 1] = $8.69

Similarly for $5,000 and $5,700, we have:

Effective interest = $5,000 * [(1 + 3.25% / 365)^12 - 1] = $5.35

Effective interest = $5,700 * [(1 + 3.25% / 365)^4 - 1] = $2.03

Now,

Total Interest = $8.69 + $5.35 + $2.03 = $16.07 which is close to $16.08 and the difference is because of rounding off.

Hence, the correct option is D.

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