Jane James owns an appliance store. She usually receives $50,000 worth of appliances per month. She doesn't like to owe people money and always pays her bills on the day she receives the invoice. Someone told her that if she delayed payment, she could actually increase her profit because the money would be earning interest in her account. She went through her bills and found that she actually had an additional 10 days, on average, to pay her invoices. She also found that she was earning 2 percent interest on the money she had in her money market savings account. If she delayed payment by the 10 days, how much additional interest would she earn for the year? Explain how this problem represents a disbursement float.
Jane James owns an appliance store. She usually receives $50,000 worth of appliances per month. She doesn't like to owe people money and always pays her bills on the day she receives the invoice. Someone told her that if she delayed payment, she could actually increase her profit because the money would be earning interest in her account. She went through her bills and found that she actually had an additional 10 days, on average, to pay her invoices. She also found that she was earning 2 percent interest on the money she had in her money market savings account. If she delayed payment by the 10 days, how much additional interest would she earn for the year? Explain how this problem represents a disbursement float.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Jane James owns an appliance store. She usually receives $50,000 worth of appliances per month. She doesn't like to owe people money and always pays her bills on the day she receives the invoice. Someone told her that if she delayed payment, she could actually increase her profit because the money would be earning interest in her account. She went through her bills and found that she actually had an additional 10 days, on average, to pay her invoices. She also found that she was earning 2 percent interest on the money she had in her
- If she delayed payment by the 10 days, how much additional interest would she earn for the year?
- Explain how this problem represents a disbursement float.
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