ASSIGNEMNT #2 1

. What are the reasons for holding cash in companies around the world?

2. ABC Ltd. Has determined that its short-term investments are yielding 5% annually, and the cost is $25 each time it buys and sells securities. ABCs total assets amount $150,000, its variance of net daily cash flow is estimated to be $65,580, and it wants to keep a minimum 10% of total assets in a cash account.

(A) What is the firms cash balance according to Miller-Orr Model?

(B) What is the upper limit for the cash account according to Miller-Orr Model?