The optimal amount of the firm's liquid asset balance to be invested in marketable securities is a function of

Question

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The optimal amount of the firm's liquid asset balance should be determined by considering both the interest earned over the expected holding period and the transaction cost involved in buying and selling the securities. A higher interest earned would incentivize the firm to invest more in marketable securities, while a higher transaction cost would decrease the amount of investment. Therefore, option D is the best choice as it includes both factors. Option A considers only one factor, while option B and C consider only the other factor, but option D provides a comprehensive analysis of both factors.

The Optimal Amount of the Firm's Liquid Asset Balance to Be