Question
Your firm utilizes TZS 165,000 a week to pay bills. The standard deviation of these cash flows is TZS 20,000. The fixed cost of transferring
Your firm utilizes TZS 165,000 a week to pay bills. The standard deviation of these cash flows is TZS 20,000. The fixed cost of transferring funds is TZS 48 a transfer. The applicable interest rate is 6%. The firm has established a lower cash balance limit of TZS 100,000. Answer these five questions using the BAT (Baumol-Allais-Tobin) model:
a. What is the optimal initial cash balance?
b. What is the optimal average cash balance?
c. What is the opportunity cost of holding cash?
d. What is the trading cost of holding cash?
e. What is the total cost of holding cash?
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Credit Spreads Beginners Guide To Low Risk Secure Easy To Manage Consistent Profits For Long Term Wealth Creation
Authors: Casey Boon
1st Edition
1974677419, 978-1974677412
