Question

No More Pencils, Inc., disburses checks every two weeks that average $78,000 and take seven 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 seven days? Ignore the effects of compounding interest.

Answer 1

The Interest that the company could earn will be the amount of the checks times the number of days it will delay the payment times the number of weeks that checks will be disbursed times the daily interest rate.

So, Interest = $78,000 * (7 days) * (52 weeks / 2) * 0.00011

Interest = $1,561.56

Interest that the company can earn annually if it delays the transfer of funds from an interest bearing account that pays 0.011 percent per day for 7 delayed days is $1,561.56