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What Is the Daily Net Cost of Holding a Cash

question 57

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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?


Definitions:

Sharpe Measure

A method to assess the performance of an investment by adjusting for its risk, comparing the excess return over the risk-free rate to the standard deviation of returns.

Dollar-Weighted

A method of calculating an investment's return that takes into account the time and amount of each cash flow.

Time-Weighted

A method used in finance to measure the performance of investments by calculating the compound growth rate of the investment over a specific period, regardless of external contributions or withdrawals.

Pension Fund

A type of investment pool established to manage and distribute retirement benefits for its members.

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