Hollywood Shoes would like to maintain their cash account at a minimum level of $50,000, but expects the standard deviation in net daily cash flows to be $4,000; the effective annual rate on marketable securities to be 6 percent per year; and the trading cost per sale or purchase of marketable securities to be $100 per transaction. What will be their optimal upper cash limit?
A) $59,094.77
B) $69,588.47
C) $108,765.41
D) $54,000.00

Question

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The Answer of Hollywood Shoes would like to maintain their cash account at a minimum level of $50,000, but expects the standard deviation in net daily cash flows to be $4,000; the effective annual rate on marketable securities to be 6 percent per year; and the trading cost per sale or purchase of marketable securities to be $100 per transaction. What will be their optimal upper cash limit?
A) $59,094.77
B) $69,588.47
C) $108,765.41
D) $54,000.00

Hollywood Shoes Would Like to Maintain Their Cash Account at a Minimum