Final answer:
The minimum transfer amount for a wire transfer can be determined by comparing the transfer costs with the opportunity cost of funds being available one day earlier due to faster transfer by wire. The break-even point is found when the daily opportunity cost of the transferred amount at an 11% annual rate exceeds the $18 difference between wire and ACH transfer fees.
Step-by-step explanation:
The student is asking to calculate the minimum transfer amount for which it is more economical to send a wire transfer instead of an ACH transfer. The cost for a wire is $20.00 and for an ACH transfer it is $2.00. Additionally, there is an opportunity cost of 11% for the funds, and using a wire transfer speeds up the transfer by one day.
To find the break-even point where a wire transfer becomes more economical than an ACH transfer, we need to consider the cost of the wire transfer as well as the potential earnings from the funds if they were available one day earlier. This is calculated by taking into account the opportunity cost. The opportunity cost is the return that could be earned on the money if it was invested during the time it was being transferred.
Let the minimum transfer amount needed be 'X'. Because the wire transfer speeds up the transfer by one day, the opportunity cost for one day needs to be considered. Calculating the daily opportunity cost for 'X' amount of money with an annual rate of 11% gives us (X * 0.11 / 365). This value needs to surpass the difference in fees between a wire transfer and ACH which is $18 ($20 - $2).
So the equation is: X * 0.11 / 365 > $18
Solving for 'X' gives us the minimum transfer amount: X > ($18 * 365) / 0.11
Approximating to the nearest whole dollar, we find that 'X' should be greater than some amount to justify using a wire transfer over an ACH transfer.