What Is the Opportunity Cost of Keeping a Cash Balance

question 86

Multiple Choice

What is the opportunity cost of keeping a cash balance of $2.5 million, if the daily interest rate is 0.025 percent and the average transaction cost of investing money overnight is $50?

• A)$121
• B)$171
• C)$575
• D)$675

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Definitions:

Inefficient Method

A process or technique that does not achieve the desired outcome with the best use of resources, often resulting in wasted time or energy.

Freedmen's Bureau

An agency established by the U.S. government in 1865 to aid freed slaves during the Reconstruction era by providing food, housing, education, and legal support.

Federal Welfare

Government programs designed to aid the well-being of the population, including financial assistance, healthcare, and social services, aimed at supporting those in poverty or need.

Black Churchgoers

Individuals who are part of the African American community who regularly attend church services.