On an average day, your firm receives $6,400 in cheques from customers. These cheques are processed and clear the bank in an average of 3 days. The applicable daily interest rate is.03 %. What is the highest daily fee your firm should pay to completely eliminate the collection float? Assume each month has 30 days.

Question

Quizplus · Accepted Answer

The collection float is $6,400 * 3 days = $19,200. The daily interest on this amount is $19,200 * 0.03% = $5.76. Thus, the highest daily fee the firm should pay to eliminate the float is $5.76.

On an Average Day, Your Firm Receives $6,400 in Cheques