Applying EOQ to financial investments Karen manages a trust fund for a widower who needs an income of $40,000 a year from the fund. He has instructed her to invest the money in securities that can be liquidated on short notice. Karen is to withdraw sufficient money from the fund to provide her client with annual cash needs. Karen sends the money as often as is most economical.

The trust fund earns 10 percent interest per year. Each time Karen withdraws money from the fund a cost of $31.25 is incurred.

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REQUIRED a. Determine how much money Karen should withdraw from the fund each time in order to satisfy the needs of her client. b. How often will Karen have to send money to her client?