Determine if it would be a good idea to implement a money market sweep investment account with your main concentration bank for June 2021

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Ledger Balance: 1,250,000

Deposit Float of 250,000

1. If the Fed Funds overnight rate for the year is expected to average 2% and the SOFR Overnight rate is expected to be 2%, would you implement the sweep? Show calculations.

2. How would you recommend allocating your investments if expected monthly bank fees was expected to be only $500 and there are no FDIC charges. Assume the same Bank balances and Money market rates, assume the Fed Funds rate is 2.5% (hint no Earning credit will be given after all bank fees are offset).

Money Market Sweep SOFR Overnight rate 2% Investment Rate Bank Earnings Credit Fed Fund O/N rate 2% reserve rate is 10% None Fixed Monthly Cost of $100 deducted from Sweep credited interest FDIC charge on N/A average balance left in the bank account 10bps (Actual / 365) Hint: compute on collected balance left in the bank account $2,000 N/A Expected Monthly bank account fees Day count for interest .083 .082 Money Market Sweep SOFR Overnight rate 2% Investment Rate Bank Earnings Credit Fed Fund O/N rate 2% reserve rate is 10% None Fixed Monthly Cost of $100 deducted from Sweep credited interest FDIC charge on N/A average balance left in the bank account 10bps (Actual / 365) Hint: compute on collected balance left in the bank account $2,000 N/A Expected Monthly bank account fees Day count for interest .083 .082