UMUC bank has a local subsidiary, which requires $75,000 cash every month. It uses $safe armored...

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UMUC bank has a local subsidiary, which requires $75,000 cash every month. It uses $safe armored...

UMUC bank has a local subsidiary, which requires $75,000 cash every month. It uses $safe armored trucks service for cash delivery. Service company charges $500 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.)

business finance

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Answer 1

Answer #1

The economic order quantity is calculated as follows

EOQ = 2 x Annual demand x Ordering cost carrying cost

EOQ = 2 x 12 x 75000 x 500 0.15

Economic order quantity = $ 77,460

Thus the local subsidiary should order $ 77,460 each time.

Armored truck service trips per year $\approx$ 12

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Answer 2

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UMUC bank has a local subsidiary, which requires $75,000 cash every month. It uses $safe armored...

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