Banks charge fees of up to $56 for bounced cheques; that is, NSF cheques that exceed the balance in the payor's account. It has been estimated that processing bounced cheques costs a bank less than $5 per cheque. Thus, the profit margin on bounced cheques is high. Recognizing this, banks process cheques from largest to smallest within the same date range. By doing this, they maximize the number of cheques that bounce if a customer overdraws an account.

Banks charge fees of up to $56 for bounced cheques; that is, NSF cheques that exceed the balance in the payor's account. It has been estimated that processing bounced cheques costs a bank less than $5 per cheque. Thus, the profit margin on bounced cheques is high. Recognizing this, banks process cheques from largest to smallest within the same date range. By doing this, they maximize the number of cheques that bounce if a customer overdraws an account.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter17: The Management Of Cash And Marketable Securities

Section: Chapter Questions

Problem 2P

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