What Is the Daily Net Cost of Holding a Cash

question 57

Multiple Choice

What is the daily net cost of holding 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:

Fair Value

The estimated price at which an asset or liability could be bought or sold in a current transaction between willing parties, other than in a liquidation sale.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded over time for fixed assets, signifying the reduction in their value.

Fair Value

An estimated market value of an asset or liability based on current market prices or valuations of similar instruments.

Mortgage

A loan secured by real property, typically paid back with interest over a long period, used by individuals and businesses to purchase real estate.