Question

On an average day, Campus Cafe receives $26,482 in checks from customers. These checks clear the bank in an average of 1.3 days. The applicable daily interest rate is .016 percent. What is the highest daily fee that should be paid to completely eliminate the collection float? Assume each month has 30 days.

Answer 1

The highest daily fee to eliminate collection float is $551 (approx). According to the given information, the highest daily fee that should be paid to eliminate the collection float is $550.82 which is approx $551.

What is a Collection Float?

Collection Float refers to an asset that is currently in a state of transition. It is used in two contexts:

• Concerning the Shares

• Concerning the Bank Deposits    

Given,

Average Daily Receipt = $26,482

Average clearing days = 1.3 days

Daily Interest Rate = 0.016%

Required to Calculate = Highest daily fee to eliminate collection float

Calculation,  

Highest daily fee collection float = Average daily receipt x Average clearing days x daily interest rate.

                                                        = $26,482 x 1.3 x 0.016%

Highest daily fee to eliminate  collection float = $550.8 which is $551 (approx).

Thus, According to the given information, the highest daily fee that should be paid to eliminate the collection float is $550.82 which is approx $551.

Learn more about Collection Float here:

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