Your firm needs $135,000 a week to pay bills. The standard deviation of the weekly disbursements is $12,000. The firm has established a lower cash balance limit of $60,000. The applicable interest rate is 5 % and the fixed cost of transferring funds is $45. What is the optimal average cash balance?
A) $41,398
B) $49,006
C) $56,205
D) $68,208
E) $112,410
Correct Answer:
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