The cash manager of Bronco , inc. is contemplating the choice between using a wire transfer and an EDT. She estimates that her investment opportunity rate is 10 percent. The banks ECR is currently 7 percent and reserve requirement is 10 percent. Her bank account officer informs her that a wire transfer will cost $ 20 and will provide collected balances one day earlier than the EDT which cost $.75. Further, assume that the transfer will occur during the middle of the week.

a. Assume that the balances transferred are above the balances required to compensate the deposit bank for services. Calculate the minimum transfer balance required to justify the use of a wire transfer.

b. Assume that the balances transferred are below the balances required to compensate the deposit bank. Calculate the minimum transfer balance required to justify the use of a wire transfer.

c. Why are the answers in two preceding parts different?

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