The Cost of Going to an ATM Is $1 in an Economy.If

question 57

Multiple Choice

The cost of going to an ATM is $1 in an economy.If the nominal interest rate in the economy is 5 percent, what is the total cost associated with holding cash for an individual who spends $10 daily and has a 15 percent probability of having his cash lost or stolen? Assume that he visits the ATM once in every T days.

• A)(182.5/T) + (0.2 × T)
• B)(182.5/T) + (0.2 × T).
• C)(365/T) + (0.5 × T)
• D)(365/T) + T

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Definitions:

Payback

The amount of time it takes for an investment to generate enough returns to recover the original investment cost.

Average Accounting Return

A financial ratio that reflects the average net income of an investment compared to its average book value.

Liquid Investments

Assets that can be easily converted into cash with minimal impact on their value.

Biased

Demonstrating or exhibiting unfair or prejudiced perspectives, often leading to partial judgments or decisions.