All of the following are assumptions of the Baumol Model except:

Question

Quizplus · Accepted Answer

The Baumol Model is based on the assumption that the firm’s cash inflows and outflows occur at a steady and predictable rate, and that the firm aims to minimize the sum of its transaction costs and holding costs. The model does not assume any specific optimum cash balance that the firm should hold, as this varies depending on the firm’s specific circumstances and needs. Therefore, choice D is not an assumption of the Baumol Model.

All of the Following Are Assumptions of the Baumol Model