Dilly Deli, Inc., a nation-wide chain of deli-style restaurants, has built a $34,000 balance in one of its regional bank accounts. It wishes to move $30,000 to its main concentration account. A DTC cost $1.50 and requires 3 days to clear; an EDT costs $3.00 but requires only 1 day to clear; and a wire transfer costs $15 and clears the same day. Dilly Deli, Inc. can earn 7% on short term investments.
-Refer to Dilly Deli.Again assume short term investments can earn 7%.What is the minimum amount that needs to be transferred in order to make the wire transfer more cost effective than the EDT?

Question

Quizplus · Accepted Answer

The wire transfer is more cost effective if the amount transferred is greater than $62,751. This is because the wire transfer costs $15, while the EDT costs $3.00 and requires 1 day to clear. If the amount transferred is greater than $62,751, then the interest earned on the amount transferred will be greater than the cost of the wire transfer.