What Is the Opportunity Cost of Keeping a Cash Balance

question 69

Multiple Choice

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

• A) $121
• B) $171
• C) $575
• D) $675

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Definitions:

Forthcoming Contribution

Anticipated contributions or investments expected to be received or made in the near future.

Capital Account Balances

The record of the financial transactions regarding national assets and liabilities over a period, or the equity and loan accounts of a business.

Cash Account

An account that tracks the amount of cash on hand, which includes currency, checks, and balances in bank accounts.

Liquidation Expenses

Costs associated with the process of dissolving a company and distributing its assets to claimants.