Couch’s Barbecue has a monthly ledger balance of $100,000 and deposit float of $30,000. The First Bank of Jonesboro pays Couch’s an earnings credit rate of 0.50%. The reserve requirement ratio is 10%. Couch’s monthly service charges equal $285.
a. Calculate Couch’s earnings credit.
b. How much will the bank debit from Couch’s account (for the monthly service charges)?
c. What collected balance is required to ensure that Couch’s service charges are offset by the earnings credit?
d. Using the original assumptions, what ECR would allow Couch’s service charges to be offset by the earnings credit? Does your answer seem likely?