R&R Savings Bank finds that its basic current account, which requires a £1,000 minimum balance, costs this savings bank an average of £3.25 per month in servicing costs (including labour and computer time) and £1.25 per month in overhead expenses. The savings bank also tries to build in a £0.50 per month profit margin on these accounts. What monthly fee should the bank charge each customer?
Further analysis of customer accounts reveals that for each £100 above the £1,000 minimum in average balance maintained in its current accounts, R&R Savings saves about 5 percent in servicing costs with each account.
For a customer who consistently maintains an average balance of £1,200 per month, how much should the bank charge in order to protect its profit margin?