=+LG 6 P15–17 Management of cash balance Alexis Morris, an assistant manager at a local department store, gets paid every 2 weeks by direct deposit into her checking account. This account pays no interest and has no minimum balance requirement. Her monthly income is

$4,200. Alexis has a “target” cash balance of around $1,200, and whenever it exceeds that amount, she transfers the excess into her savings account, which currently pays 2.0% annual interest. Her current savings balance is $15,000, and Alexis estimates that she transfers about $500 per month from her checking account into her savings account.

Alexis doesn’t waste any time in paying her bills, and her monthly bills average about

$2,000. Her monthly cash outlay for food, gas, and other sundry items totals about

$850. Reviewing her payment habits indicates that on average she pays her bills 9 days early. At this time, most marketable securities are yielding about 4.75% annual interest.

Show how Alexis can better manage her cash balance.