Question
Assume that interaffiliate cash flows are uncorrelated with one another. Assume that each affiliate will have to make all planned payments before it receives any
Assume that interaffiliate cash flows are uncorrelated with one another. Assume that each affiliate will have to make all planned payments before it receives any cash. Under a conservative policy, 3 times of S.D. cash for precautionary purpose as the sufficient cash to cover 99.87% of transactions under either decentralized system or centralized system.
| Affiliate | Expected Receipts | Expected Disbursements | Standard Deviation |
| U.S. | $100,000 | $140,000 | $40,000 |
| Germany | $150,000 | $135,000 | $60,000 |
| Mexico | $175,000 | $125,000 | $30,000 |
| Japan | $200,000 | $130,000 | $70,000 |
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- Calculate the sufficient amount of cash for precautionary purpose 1) by the centralized depository.
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- Calculate the sufficient amount of cash for precautionary purpose if depository system is decentralized.
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- Can you confirm that the centralized depository is more beneficial to the company? If so, How?
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Public Finance And Public Policy
Authors: Jonathan Gruber
2nd Edition
0716766310, 9780716766315
