28.7 Gold Star Co. and Silver Star Co. both manage their cash flows according to the Miller-

Orr model. Gold Star’s daily cash flow is controlled between $100,000 and $200,000, whereas Silver Star’s daily cash flow is controlled between $150,000 and $300,000. The annual interest rates Gold Star and Silver Star can get are 10 percent and 9 percent, respectively, and the costs per transaction of trading securities are $2,000 and $2,500, respectively.

a. What are their respective target cash balances?

b. Which firm’s daily cash flow is more volatile?