Your firm has average daily receipts of $2,500. These receipts are available after 6 days on average. The interest rate that could be earned is .02% (.0002) per day. What is the approximate cost of the float per day?

Question

Quizplus · Accepted Answer

The formula to calculate float is:

Float = Average daily receipts x Float time x Interest rate

where Float time is the time in days it takes for the funds to become available.

Here, average daily receipts = $2,500 and Float time = 6 days (as it takes 6 days on average for the receipts to become available).

The interest rate given is .02% per day, but we need to convert it into a decimal form by dividing it by 100. So,

Interest rate = 0.0002

Using the formula:

Float = $2,500 x 6 x 0.0002 = $3 per day

Therefore, the approximate cost of float per day is $3. So, the best choice is (B) $3.00.

Your Firm Has Average Daily Receipts of $2,500