A company has set a safety cash balance of $100,000. The standard deviation () of the daily cash balance during the last year was $500, and the transaction cost was $5. The company also has the opportunity to invest idle cash in marketable securities at an annual interest rate of 10%. Required

i.) Determine the daily opportunity cost ( interest rate) and the variance of daily cash flow

ii.) Calculate the targeted cash balance ( the return point) for the firm

iii.) The upper limit of cash balance and the average cash balance.

iv.) State the amount of short-term securities to be purchase or sold once the upper limit or lower limit is reach. iv) How would you evaluate this approach to cash management?