Schulte Fashions begins every month with a cash balance of $8,000 which it depletes by the end of the month. The current market rate of return is 0.4% per month. Schulte is charged a fee of $20
Each time it is forced to raise cash. In addition, history has shown that the monthly standard
Deviation of cash ﬂows is $1,500. The ﬁrm has targeted a lower cash limit of $2,500.
At what level of cash would Schulte choose to remove cash from the account and invest in
Marketable securities?

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The Answer of Schulte Fashions begins every month with a cash balance of $8,000 which it depletes by the end of the month. The current market rate of return is 0.4% per month. Schulte is charged a fee of $20
Each time it is forced to raise cash. In addition, history has shown that the monthly standard
Deviation of cash ﬂows is $1,500. The ﬁrm has targeted a lower cash limit of $2,500.
At what level of cash would Schulte choose to remove cash from the account and invest in
Marketable securities?

Schulte Fashions Begins Every Month with a Cash Balance of $8,000