UMUC bank has a local subsidiary, which requires $75,000 cash every week. It use
ID: 2577583 • Letter: U
Question
UMUC bank has a local subsidiary, which requires $75,000 cash every week. It uses $safe armored trucks service for cash delivery. Service company charges $440 for each delivery.
In order to send cash to its subsidiary, the bank has to liquidate part of its securities portfolio which generates 15% annual return.
How many armored truck service trips PER YEAR should the bank order?
(Hint: The annual rate of return in this question is given as 12 * actual monthly rate of return. You can round off to the nearest whole number, for example if your answer is 17.62, you can answer 18.)
Explanation / Answer
Answer:- The cash required by the subsidiary per week = $75,000
Numberror of weeks in a year = 52
Total amount of cash required per year = $75,000×52 = $39,00,000
In oder to send the cash to its subsidiary, bank has to liquidate part of its cash in security portfolio for which the rate of return = 15%
= 39,00,000 × 15% = $5,85,000
Service company charges $440 for each delivery
Armored Truck service trips the bank orders per year = $585,000/440 = 1330 trips
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