Question
1a) Your income is $65,000 a year. Bonds earn 4.25% interest. Converting from bonds to cash costs $17 per transaction. Given the assumptions of the
1a) Your income is $65,000 a year. Bonds earn 4.25% interest. Converting from bonds to cash costs $17 per transaction. Given the assumptions of the inventory model, what is the optimum number of cash conversions per year? [Express your number rounded off to one decimal place.]
1b) Extending from #1a, what is your money demand? Do not round off intermediate values. [Express in dollars, rounded off to the nearest whole dollar, using a $ sign and a comma if the value is in the thousands.]
1c) Extending from #1a, one year later increased productivity has resulted in your income rising to $78,000, but the cost of bond conversions have increased to $24 per transaction. Now what is the optimal number of conversions per year? [Express your number rounded off to one decimal place.]
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