Questions 26-30

26.MSU's assistant treasurer wants to use the Baumol Model to determine the optimal cash transfer amount. The firm develops the following parameters: an annual opportunity cost is 12%, a fixed cost per securities transaction is $75, and total annual cash needs for the year is $5,000,000. What is the optimal cash transfer amount?

	a.	$65,325.27
	b.	$6,324.55
	c.	$7,472.14
	d.	$79,056.94

3 points

QUESTION 27

Following Question 26, what is the total annual cost (transaction and carrying costs) of the cash position?

	a.	$6324.58
	b.	$9,486.83
	c.	$3,162.29
	d.	$4,743.42

3 points

QUESTION 28

Following Question 26, assume that the treasurer wants to use the Miller-Orr Model to determine the optimal transfer amount and has developed the following additional parameters: lower control limit = $5,000 and variance of daily cash flows = $5,000,000. What should the cash return level be?

	a.	$9,492.95
	b.	$4,492.95
	c.	$14,492.95
	d.	$19,492.95

3 points

QUESTION 29

Following Question 28, what is the optimal value of upper control limit?

	a.	$17,657.27
	b.	$46,052.66
	c.	$33,478.86
	d.	$42,690.07

3 points

QUESTION 30

Following Question 28, what is the average cash balance?

	a.	$21,506.95
	b.	$17,657.27
	c.	$14,492.95
	d.	$19,283.27

3 points