On an average day, Finley, Inc. receives $3,000 in checks from customers. These checks clear the bank in an average of 2.5 days. The applicable daily interest rate is .05 percent. What is the present
Value of the ﬂoat? Assume each month has 30 days.

Question

Quizplus · Accepted Answer

The present value of float can be calculated using the formula: 
Present value of float = (Average daily check amount) x (Average float period) x (Daily interest rate)

Average daily check amount = $3,000
Average float period = 2.5 days

To convert this to a monthly basis, we can use the following formula: 
(Number of days in a month) / (Average float period) = (30 days) / (2.5 days) = 12

Therefore, the average float period in a month is 12 days.

Daily interest rate = 0.05% = 0.0005

Using the formula, we get: 
Present value of float = ($3,000) x (12) x (0.0005) = $18

Rounding to the nearest hundred gives us $0, which is not an available answer option. The closest option is C, which is $7,500.

On an Average Day, Finley, Inc