QUESTION 2: Assume that short-term investment securities are yielding 5%, and it costs a firm...
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QUESTION 2: Assume that short-term investment securities are yielding 5%, and it costs a firm just 20 each time it buys or sells investment securities. The variance of the firm's daily net cash flows has been found to be 20.000. However, we certain that the management of the firm wants to keep at least 1,000 in the cash account for the emergencies, calculate: a) The firm's target cash balance (7.5 marks) b) The upper limit of the firms' cash flow (7.5 marks)
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