How much is someone who visits the ATM once every 7 days and has an average cash balance of $70 expected to spend daily? Select one: a. $5 b. $10 c. $15 d. $20
The correct answer and explanation is:
The correct answer is a. $10.
To calculate how much someone is expected to spend daily, we need to divide the average cash balance by the number of days between ATM visits. If the person visits the ATM once every 7 days and has an average cash balance of $70, we can make the following calculation:
Daily expenditure = Average balance / Number of days between ATM visits
Daily expenditure = $70 / 7 days
Daily expenditure = $10 per day
This means that the person, on average, is spending $10 every day to deplete the $70 in cash over the 7-day period.
This calculation assumes that the person’s spending pattern is uniform and that the cash balance is completely depleted by the time they visit the ATM again. The figure of $10 represents the daily amount spent to maintain an average balance of $70 over a 7-day period, which helps in understanding how much money is needed to sustain this withdrawal cycle.
The expenditure pattern is directly related to how often the person withdraws funds and the average balance they carry. With this calculation, it becomes evident that the individual is withdrawing or spending approximately $10 each day, contributing to the depletion of their balance until they restock it with a new ATM visit.