Question

Every two weeks, No More Pencils, Inc., disburses checks that average $83,000 and take six days to clear. How much interest can the company earn annually if it delays transfer of funds from an interest-bearing account that pays .011 percent per day for these six days

Answer 1

No More Pencils, Inc.

The company can earn annually an interest amounting to $142,428 as calculated below:

Step-by-step explanation:

a) Data and Calculations:

Average Checks Disbursement = $83,000 every two weeks

This implies 26 times every year (52/2).

Interest per day = 0.011%

Interest for 6 days = 0.066%

Interest earned every two weeks = $83,000 * 0.066 = $5,478

Annual interest earned = $142,428 ($5,478 * 26)

b) The assumption is that there are 52 weeks in a typical year. This implies that No More Pencils, Inc. will disburse checks 26 times in the year.