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Costs and Revenues

Home Town Bank has two types of individual customers who make demand deposits: college students and regular customers. The bank charges college students$.10 per check but regular customers get free checking service. The bank earns 10% on the customer deposits by lending money to other clients and pays the customers 5% on deposits.

Each type of customer costs the bank $20 in terms of accounting and mailing. The average college student deposit in Home Town Bank is $300 regular customers have average deposits of $1,000 college students write an average of 100 checks per year

Which customer is more profitable for the bank?

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Solution Summary

Solution describes which customer is more profitable for the bank.

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