Use the information that is given and that you have calculated in the earlier questions to determine the cost of managing cash balances for the city. Again, do not include the dollar sign in your answer.

The city has expenditures of $ 18,000,000 per quarter but does not want to deposit $ 18,000,000 in its checking account at the beginning of the quarter then then simply draw on it as the quarter progresses. The financials manager recognizes that some of the $ 18,000,000 can be held in an interest bearing account that is accessible during the quarter. The bank pays 4 % per year on this account. It also charger the city $ 144 per transfer when the city moves money from the interest bearing account to its checking account (which pays zero percent interest)

Question 3

 

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