Calculate minimum transfer balance required

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Reference no: EM131336166

The cash manager of Verematic, Inc., is contemplating the choice between using a wire transfer and an EDT. He estimates that his investment opportunity rate is 9%. The bank's ECR is currently 4%, and the reserve requirement is 12%. His bank account officer informs him that a wire transfer will costs $15 and will provide collected balances 1 day earlier than the EDT, which costs $0.30. a. Assume that the balances transferred are above the balances required to compensate the deposit bank for its services. Calculate the minimum transfer balance required to justify the use of a wire transfer. b. Assume that the balances transferred are below the balances required to compensate the deposit bank. Calculate the minimum transfer balance required to justify the use of a wireless transfer.

Reference no: EM131336166

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