Question
Assume that short-term investment securities have a 5 percent yield, and it costs the firm a $20 each time it buys or sells investment securities.
Assume that short-term investment securities have a 5 percent yield, and it costs the firm a $20 each time it buys or sells investment securities. The best estimate of annual disbursements is found to be $20,000.
Given these conditions, find the firms target cash balance, according to the Baumol model
What is the average cash balance?
How many security sales will management execute?
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Financial Institutions Management A Risk Management Approach
Authors: Marcia Cornett, Patricia McGraw, Anthony Saunders
8th edition
978-0078034800, 78034809, 978-0071051590
