Shakira has a balance of $202.86 in her checking account on Saturday morning. She uses her debit card to pay her cell phone bill of $80.73 over the phone. She then picks up her dry cleaning, dog food at the pet store, and groceries for debits of $16.89, $35.24, and $113.92. Shakira's bank uses a balance system of deducting highest transactions first. The bank will not return amounts up to a total of $50 in overdrafts, but they do charge a fee for each overdraft. How many overdraft fees will Shakira incur?
A. 1
B. 2
C. 3
D. 4
Answer (2)
Sort transactions from highest to lowest: $113.92 , $80.73 , $35.24 , $16.89 .
Subtract transactions from the initial balance: $202.86 .
Determine when the balance goes negative: after the 3rd and 4th transactions.
Conclude that Shakira incurs two overdraft fees: 2 .
Explanation
Understanding the Problem Let's analyze Shakira's spending to determine how many overdraft fees she will incur. We need to consider her initial balance, the amounts of her transactions, and the bank's policy of deducting the highest transactions first.
Sorting Transactions First, we sort the transactions from highest to lowest: $113.92 , $80.73 , $35.24 , $16.89 .
Calculating Balance After Each Transaction Next, we subtract the transactions from the initial balance in descending order:
Initial balance: $202.86
After the first transaction ( $113.92 ): $202.86 − $113.92 = $88.94
After the second transaction ( $80.73 ): $88.94 − $80.73 = $8.21
After the third transaction ( $35.24 ): $8.21 − $35.24 = − $27.03
After the fourth transaction ( $16.89 ): − $27.03 − $16.89 = − $43.92
Identifying Overdrafts Now, let's determine when the account balance goes below zero. The balance becomes negative after the third transaction ( $35.24 ). This is the first overdraft. The balance remains negative after the fourth transaction ( $16.89 ), which means there is a second overdraft.
Determining the Number of Overdraft Fees Therefore, Shakira will incur two overdraft fees.
Examples
Understanding how overdraft fees work can help you manage your bank account effectively. For example, if you know your bank deducts the largest transactions first, you can prioritize keeping enough money in your account to cover those larger expenses. This can prevent you from incurring overdraft fees, which can add up quickly and cost you money. By carefully tracking your spending and understanding your bank's policies, you can avoid these unnecessary charges and maintain a healthy financial standing.
Shakira will incur two overdraft fees after her transactions are processed. Her balance becomes negative after the third transaction and remains negative through the fourth transaction. Therefore, the correct answer is B. 2.
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