Once each year, B. Smith Inc. receives a $2 million payment. Of this amount, $700,000 is needed for cash payments made during the next year. Each time Smith deposits money in its account, a charge of $2.00 is assessed to cover clerical costs. If Smith can hold marketable securities which yield 5 percent, and then convert these securities to cash at a cost of only the $2 deposit charge, what is the total cost for one year of maintaining the optimal cash balance according to the EOQ (Baumol) model?

a. $7,483

b. $ 187

c. $3,741

d. $ 374

e. $ 748