Cash management model exercise 2. 'Skateboard Ltd.', has a standard deviation of daily cash flows of 2,000. The annual (365 days) interest rate is 10.95%. 'Skateboard Ltd', desires a minimum cash balance of 3,000. The fixed cost of a security transaction is 60.

Using an appropriate cash management model, determine:

(i) Skateboard's target cash balance;

(ii) The upper limit on cash balance;

(iii) The average daily cash balance;

(iv) The worth of the company's purchase of marketable securities each time the cash balance reaches the upper limit.