An employee of Macro.com Corporation is paid $5,000 a month, which she spends regularly throughout the month until she has a zero balance in her checking account at the end of the month.If the corporation changes to a semimonthly payroll schedule, how will the employee's average cash balance change? Assume she does not change her spending pattern when she is now paid twice a month.

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Quizplus · Accepted Answer

With a semi-monthly payroll, the employee will receive 24 paychecks of $2,500 each per year (assuming 12 months in a year). Since the employee's spending pattern remains the same, her average cash balance will be half of her monthly salary, which is $2,500/2 = $1,250 per month.

An Employee of Macro