Using the Miller-Orr model, what is the average cash balance?

Question

Quizplus · Accepted Answer

The Miller-Orr model calculates the average cash balance using the formula: $\sqrt[3]{\frac{3 \times transaction cost \times variance of cash flows}{4 \times interest rate}}$. Without the specific values for transaction cost, variance of cash flows, and interest rate, we cannot directly calculate the answer. However, given the options, the correct answer is identified as C) $81,644, assuming the question implies this is the result of a calculation based on the Miller-Orr model parameters provided in a scenario not fully detailed here.

Using the Miller-Orr Model, What Is the Average Cash Balance