Consider the case of William March,who is paid $3,000 every 30 days.His transaction cost (F)is $2,and the interest rate for a 30-day period is 0.9 percent (i = 0.009).The formula N* = (iY)^1/2/(2F)^1/2says March should go to the bank 2.598 times a month.Is this possible? Since total costs given in the text are iY/(2N)+ FN,compute total costs for two and three trips.Which should he choose? What is the average cash balance in this case?

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The Answer of Consider the case of William March,who is paid $3,000 every 30 days.His transaction cost (F)is $2,and the interest rate for a 30-day period is 0.9 percent (i = 0.009).The formula N* = (iY)^1/2/(2F)^1/2says March should go to the bank 2.598 times a month.Is this possible? Since total costs given in the text are iY/(2N)+ FN,compute total costs for two and three trips.Which should he choose? What is the average cash balance in this case?

Consider the Case of William March,who Is Paid $3,000 Every