Pure Storage FAAA_004 Q&A - in .pdf

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NEW QUESTION: 1
An entity has daily cash receipts of US $100,000 and collection time of 2 days. A bank has offered to reduce the collection time on the entity's deposits by 2 days for a monthly fee of US $500. If money market rates are expected to average 6% during the year, the net annual benefit loss) from having this service is:
A. US $3,000
B. US $0
C. US $6,000
D. US $12,000
Answer: C
Explanation:
If collection time is 2 days, and average daily receipts are US $ 100,000, the average cash balance will increase by I. $200,000 if the bank's system is adopted At a 6% interest rate, US $200,000 will generate US $12,000 of interest revenue annually. The US $500 monthly charge by the bank will result in an annual expense of US $6,000. Thus, the net annual benefit is US $6,000 $12,000 - 6,000).


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Answer: C

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CORRECT TEXT
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