Gareth has $2,000 to invest. Putting the money in a savings account at his local bank will earn him 2.2% annual interest and gives him the ability to make ATM withdrawals from that bank’s ATMs. Putting the money in an online savings account will earn him 4.85% annual interest, but he will be charged $3 every time he makes an ATM withdrawal. Assuming that Gareth’s ATM withdrawals do not affect the amount of interest he earns, roughly how many ATM withdrawals must Gareth make every year for the local savings account to be a better deal than the online savings account?
The online account earns $2,000 × (4.85% − 2.2%) = $53 more interest per year. Each ATM withdrawal costs $3, so Gareth needs more than $53 ÷ $3 ≈ 17.7 withdrawals for the local account to be the better deal. That means 18 withdrawals, choice C.
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