Question

No More Pencils, Inc., disburses checks every two weeks that average $82,000 and take five 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 five days? Ignore the effects of compounding interest. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

$1,172.60

Step-by-step explanation:

Data provided in the question:

Average checks disbursed = $82,000

Number of times checks disbursed = every two week

also,

in an year there are 52 weeks

therefore,

Number of times checks disbursed in a year =
`(52)/(2)` = 26

Interest rate = 0.11%

Number of days payment delayed = 5

Now,

interest company earned

= Amount of the checks × Number of days payment delayed × Number of weeks that checks will be disbursed × interest rate,

= $82,000 × 5 × 26 × 0.011%

= $1,172.60