Hollywood Shoes Would Like To Maintain Their Cash Account At A Minimum Level

ze:12.0pt;line-height:115%;font-family:”Times New Roman”,serif; mso-fareast-font-family:”Times New Roman”;color:black;mso-themecolor:text1'>Accounting – Others: 

 

Question: Hollywood Shoes Would Like To Maintain Their Cash Account At A Minimum Level Of $50,000, But Expects The Standard Deviation In Net Daily Cash Flows To Be $4,000; The Effective Annual Rate On Marketable Securities To Be 6 Percent Per Year; And The Trading Cost Per Sale Or Purchase Of Marketable Securities To Be $100 Per Transaction. What Will Be Their Optimal

Hollywood Shoes would like to maintain their cash account at a minimum level of $50,000, but expects the standard deviation in net daily cash flows to be $4,000; the effective annual rate on marketable securities to be 6 percent per year; and the trading cost per sale or purchase of marketable securities to be $100 per transaction. What will be their optimal upper cash limit?

$59,094.77

$69,588.47

$108,765.41

$54,000.00

 

 


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