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Assume short-term securities yield 5% and it costs $20 for buying and selling securities. The variance of the firm's daily net cash balances is $20,000.

  1. Assume short-term securities yield 5% and it costs $20 for buying and selling securities. The variance of the firm's daily net cash balances is $20,000. Management keeps at least $1,000 in cash balances. What is the maximum amount the firm will let accumulate in its cash account before investing in marketable securities? How much will the firm invest?

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