A treasury manager would like to develop a funds concentration policy for her staff to use to determine when to transfer funds using a wire transfer or an ACH transfer. The pertinent information appears below.Each wire costs $25Each ACH transfer costs $0.75Opportunity cost of funds is 5%Earnings credit rate is 1%Reserve requirement ratio is 10%For a mid-week transfer, what is the minimum transfer balance that justifies a wire transfer?For transfers made on Friday, what is the minimum transfer balance that justifies a wire transfer?

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A treasury manager would like to develop a funds concentration policy for her staff to use to determine when to transfer funds using a wire transfer or an ACH transfer. The pertinent information appears below.

Each wire costs $25
Each ACH transfer costs $0.75
Opportunity cost of funds is 5%
Earnings credit rate is 1%
Reserve requirement ratio is 10%

For a mid-week transfer, what is the minimum transfer balance that justifies a wire transfer?
For transfers made on Friday, what is the minimum transfer balance that justifies a wire transfer?

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