A ﬁrm uses the Miller-Orr model with a minimum balance of €10, a maximum of €80, and a target balance of €40.If the cash balance was to hit €10, what would the ﬁrm do?

Question

Quizplus · Accepted Answer

When the cash balance hits the minimum level of €10, the firm should sell enough marketable securities to bring the balance back to the target level of €40, which means selling €30 in marketable securities.

A ﬁRm Uses the Miller-Orr Model with a Minimum Balance