a. Number of withdrawals Transaction costs Interest Earned Total Net Earnings

N = 1 Transaction costs = 2.1 = 2 Interest Earned = 0 Total Net Cost = -2

N = 2 Transaction costs = 2.2 = 4 Interest Earned = 15 x .0003 X 1500 = 6.75 Total Net Earnings = 6.75 - 4 = 2.75

N = 3 Transaction costs = 2.3 = 6 Interest Earned = 10 x .0003 X 2000 + 10 x .0003 X 1000= 6.00 + 3.00 = 9.00 Total Net Earnings = 9 - 6 = 3

N = 4 Transaction costs = 2.4 = 8 Interest Earned = 7.5 x .0003 X 2250 + 7.5 x .0003 X 1500 +7.5 x .0003 x 750 = 5.0625 + 3.375 + 1.6875 = 10.125 Total Net Earnings = 10.13 - 8 = 2.13

b. N = 3 lead to the largest net earnings. Average amount of cash on hand over 30 days = Y / 2N = 3000 / 2.3 = 3000 / 6 = 500