AAA Company Is Preparing Its 3rd Quarter Budget and Provides

question 149

Multiple Choice

AAA Company is preparing its 3rd quarter budget and provides the following data: Cash balance at June 30 is projected to be $4,000. The company is required to maintain a minimum cash balance of $5,000 and is authorized to borrow at the end of each month to make up any shortfalls. It may borrow in increments of $5,000 and pays interest monthly at an annual rate of 5%. All financing transactions are assumed to take place at the end of the month. Loan balance should be repaid in increments of $5,000 when there is surplus cash.
How much will the company have to borrow at the end of July?

• A)$0
• B)$5,000
• C)$15,000
• D)$10,000

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