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The average yield on marketable securities is 9 percent/year; the fixed cost of transaction is $50 per transaction. The past cash balance study indicates that
- The average yield on marketable securities is 9 percent/year; the fixed cost of transaction is $50 per transaction. The past cash balance study indicates that the firm's standard deviation of daily cash balance changes is equal to $800. The firm sees no reason why this variability should change in the future. The firm does maintain $1,000 in its demand deposits account at all times.
- What is the optimal cash return point?
- What is the upper cash balance?
- Explain how the model will work?
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