FIN
FIN 610 Homework 5-4 Iodice

# FIN 610 Homework 5-4 Iodice - Assumptions Number of Days...

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Assumptions Number of Days Saved (DS) 1 Investment Opportunity Rate (k) 10.00% ECR 7.00% Required Reserve Rate (rrr) 10.00% Wire Transfer Cost \$20.00 EDT cost \$0.75 Part B Part A Minimum Transfer Balance (TBAL) TBAL=Incremental Cost / (DS/365)*[k-ecr(1-rrr)] Incremental Cost \$19.25 \$19.25 DS/365 0.002739726 0.002739726 1-rrr 0.9 0.9 ecr*(1-rrr) 0.063 0 [k-ecr(1-rrr)] 0.037 0.1 0.00010137 0.0002739726 \$189,898.65 \$70,262.50 Part C The answers are different because for Part A it states the balances transferred are above the balances required to compensate the bank and the company tranferred excess balances so they do not lose the ecr rate on the funds tranferred. For Part B the ecr is lost so the balance needs to be larger in order to break even.

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Assumptions Day Deposit Fee \$0.00 Monday \$1,500.00 Svc Charge \$1.00 Tuesday \$2,000.00 Opp Cost 10.00% Wednesday \$1,000.00 ecr 8.00% Thursday \$10,000.00 reserve required 12.00% Friday \$25,000.00 Saturday \$35,000.00 Sunday \$10,000.00 Part A WEEK 1 Day Deposit Monday \$1,500.00 \$750.00 \$0.00 \$0.00 \$1,500.00 \$750.00 Tuesday \$2,000.00 \$1,000.00 \$750.00 (\$1,500.00) \$2,000.00 \$1,000.00 Wednesday \$1,000.00 \$500.00 \$1,000.00 (\$2,000.00) \$1,000.00 \$500.00 Thursday \$10,000.00 \$5,000.00 \$500.00 (\$1,000.00) \$10,000.00 \$5,000.00 Friday \$25,000.00 \$12,500.00 \$5,000.00 (\$10,000.00) \$25,000.00 \$12,500.00 Saturday \$0.00 \$0.00 \$0.00 \$0.00 \$25,000.00 \$12,500.00 Sunday \$0.00 \$0.00 \$0.00 \$0.00 \$25,000.00 \$12,500.00 WEEK 2 Monday
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Unformatted text preview: \$46,500.00 \$23,250.00 \$12,500.00 (\$25,000.00) \$46,500.00 \$23,250.00 Tuesday \$2,000.00 \$1,000.00 \$23,250.00 (\$46,500.00) \$2,000.00 \$1,000.00 Wednesday \$1,000.00 \$500.00 \$1,000.00 (\$2,000.00) \$1,000.00 \$500.00 Thursday \$10,000.00 \$5,000.00 \$500.00 (\$1,000.00) \$10,000.00 \$5,000.00 Friday \$25,000.00 \$12,500.00 \$5,000.00 (\$10,000.00) \$25,000.00 \$12,500.00 Sa±urday \$0.00 \$0.00 \$0.00 \$0.00 \$25,000.00 \$12,500.00 Sunday \$0.00 \$0.00 \$0.00 \$0.00 \$25,000.00 \$12,500.00 Part B ACB=sum of ±he ending collec±ed balances divided by 7 Week 1 \$44,750.00 \$6,392.86 Week 2 \$67,250.00 \$9,607.14 Part C RCB=SC/[(1-rr)*ecr] SC=\$1.00*5 5 based on 5 days 1-rr 0.88 ecr=.08/52 weeks 0.00153846 0.00135385 \$3,693.18 Available Immediately One Day Availability Transfer Clearings Ending Ledger Ending Collected Part D Assuming no fee Total Cost = FEE + [ k * (ACB - SC / ((1 - rr) * ecr)) ] \$11.37 per week Part E Rayco could possibly use some form of transfer an±cipa±on in order to reduce the average collected balance. This is because a por±on of the deposits are available immediately and the EDT take a day to clear. But they would need to consider this very carefully because it may lead to an issue of being overdrawn if the balance is less than an±cpated....
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• Spring '14
• sherri
• Week-day names, ECR, minimum transfer balance, investment opportunity rate, required reserve rate, Wire Transfer Cost

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