[CR] : Doubt in "Enterprise Bank currently requires customers with "

Question

Enterprise Bank currently requires customers with checking accounts to maintain a minimum balance or pay a monthly fee. Enterprise plans to offer accounts with no monthly fee and no minimum-balance requirement; to cover their projected administrative costs of $3 per account per month they plan to charge $30 for overdrawing an account. Since each month on average slightly more than 10 percent of Enterprise's customers overdraw their accounts, bank officials predict the new accounts will generate a profit.

Which of the following, if true, most strongly supports the bank officials’ prediction?

A. Some of Enterprise Bank's current checking account customers are expected to switch to the new accounts once they are offered.

B. One third of Enterprise Bank's revenues are currently derived from monthly fees tied to checking accounts.

C. Many checking account customers who occasionally pay a fee for not maintaining a minimum balance in their account generally maintain a balance well above the minimum.

D. Customers whose checking accounts do not have a minimum-balance requirement are more likely than others to overdraw their checking accounts.

E. Customers whose checking accounts do not have a minimum-balance requirement are more likely than others to write checks for small amounts.

I understand how D is an option that can help improve the profitability of the new scheme. But my doubt is that for this new offering to be profitable we need customers signing up for the new scheme as well. So how do I completely rule out the option A.

GmatKnightTutor · Answer

Question link: https://gmatclub.com/forum/enterprise-b ... 68508.html

HarshaBujji · Answer

We are looking for an option where the OD charges will balance the loss suffered by removing the maintenance charge.

Option A says about some accounts, Moreover, there is no clear picture of how the loss is compensated.

Hence D is better option

Bunuel · Answer

Hi,

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[CR] : Doubt in "Enterprise Bank currently requires customers with "

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