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Que – A company needs $150,000 each year for regular payments. Converting the company’s short-term investments into cash to meet these regular payments incurs a fixed cost of $400 per
transaction. These short-term investments pay interest of 5% per year, while the company earns interest of only 1% per year on cash deposits.
Answer – 54,772
My answer – 2190
The only difference in calculation is of I , in the book it is done like 0.05-0.001 but as per my understanding it should be o.o5-0.01 , please correct if I am wrong here.You are obviously using the BPP Revision Kit and there is a typing mistake in the answer and is should read 0.05 – 0.01.
However, using 0.04 as the denominator does give an answer of $54,772, so the BPP final answer is correct.
I had done some clerical mistake , now i get it .. apologizes and thanks for clearing this up!
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