Question
The cash manager of Verematic, Inc., is contemplating the choice between using a wire transfer and an EDT. He estimates that his investment opportunity rate
The cash manager of Verematic, Inc., is contemplating the choice between using a wire transfer and an EDT. He estimates that his investment opportunity rate is 9%. The bank's ECR is currently 4%, and the reserve requirement is 12%. His bank account officer informs him that a wire transfer will costs $15 and will provide collected balances 1 day earlier than the EDT, which costs $0.30. a. Assume that the balances transferred are above the balances required to compensate the deposit bank for its services. Calculate the minimum transfer balance required to justify the use of a wire transfer. b. Assume that the balances transferred are below the balances required to compensate the deposit bank. Calculate the minimum transfer balance required to justify the use of a wireless transfer.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started