Assume that you never carry cash. Your paycheck of $1,000 per month is deposited directly into your checking account on the first day of the month, and you spend your money at a constant rate so that at the end of each month your checking account balance is zero.
What is your average daily money balance for the month?
How would each of the following changes in assumptions affect your average monthly balance? Be specific with your answers.
You are paid $500 twice monthly (1st and 15th) rather than $1,000 each month.
You are uncertain about your total spending each month.
You spend a lot at the beginning of the month (e.g., for rent) and little at the end of the month.
Your monthly income increases.