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Multiple Choice Quiz
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1

Picard Industries requires $250,000 a week to pay bills. The fixed cost of transferring money is $65 per transfer. The standard deviation of the weekly cash flows is $25,000 and the lower cash balance limit is $40,000. Assume the applicable weekly interest rate is .1%. Using the Miller-Orr model, what is the optimum initial cash balance?
A)$38,478
B)$41,233
C)$55,592
D)$65,434
E)$71,233
2

Picard Industries requires $250,000 a week to pay bills. The fixed cost of transferring money is $65 per transfer. The standard deviation of the weekly cash flows is $25,000 and the lower cash balance limit is $40,000. Using the Miller-Orr model, what is the optimum upper limit?
A)$73,227
B)$100,455
C)$124,592
D)$133,699
E)$151,617
3

Picard Industries requires $250,000 a week to pay bills. The fixed cost of transferring money is $65 per transfer. The standard deviation of the weekly cash flows is $25,000 and the lower cash balance limit is $40,000. Using the Miller-Orr model, what is the average cash balance?
A)$56,250
B)$61,539
C)$81,644
D)$90,719
E)$101,617
4

O'Pinion Manufacturing estimates that they disburse $900,000 weekly in order to pay bills. The firm's annual opportunity rate is 5%. The fixed cost of transferring money is $75 per transfer. Based on historical data, the standard deviation of the weekly cash flows is $295,000 and the lower cash balance limit is $300,000. Using the BAT model, what is the optimum initial cash balance?
A)$108,639
B)$227,745
C)$355,777
D)$374,700
E)$383,270
5

O'Pinion Manufacturing estimates that they disburse $900,000 weekly in order to pay bills. The firm's annual opportunity rate is 5%. The fixed cost of transferring money is $75 per transfer. Based on historical data, the standard deviation of the weekly cash flows is $295,000 and the lower cash balance limit is $300,000. Using the BAT model, what is the optimal average cash balance?
A)$54,320
B)$113,873
C)$177,889
D)$187,350
E)$191,635
6

O'Pinion Manufacturing estimates that they disburse $900,000 weekly in order to pay bills. The firm's annual opportunity rate is 5%. The fixed cost of transferring money is $75 per transfer. Based on historical data, the standard deviation of the weekly cash flows is $295,000 and the lower cash balance limit is $300,000. Using the BAT model, what is the opportunity cost of holding cash?
A)$8,100
B)$9,367
C)$9,832
D)$10,001
E)$12,320
7

O'Pinion Manufacturing estimates that they disburse $900,000 weekly in order to pay bills. The firm's annual opportunity rate is 5%. The fixed cost of transferring money is $75 per transfer. Based on historical data, the standard deviation of the weekly cash flows is $295,000 and the lower cash balance limit is $300,000. Using the BAT model, what is the total trading cost?
A)$8,100
B)$9,367
C)$9,832
D)$10,001
E)$18,734
8

O'Pinion Manufacturing estimates that they disburse $900,000 weekly in order to pay bills. The firm's annual opportunity rate is 5%. The fixed cost of transferring money is $75 per transfer. Based on historical data, the standard deviation of the weekly cash flows is $295,000 and the lower cash balance limit is $300,000. Using the BAT model, what is the total cost of holding cash?
A)$18,734
B)$19,664
C)$24,877
D)$32,333
E)$41,237
9

O'Pinion Manufacturing estimates that they disburse $900,000 weekly in order to pay bills. The firm's annual opportunity rate is 5%. The fixed cost of transferring money is $75 per transfer. Based on historical data, the standard deviation of the weekly cash flows is $295,000 and the lower cash balance limit is $300,000. Using the Miller-Orr model, and assuming the interest rate is 0.094% per week, what is the optimum initial cash balance?
A)$173,332
B)$193,835
C)$405,592
D)$473,332
E)$493,835
10

O'Pinion Manufacturing estimates that they disburse $900,000 weekly in order to pay bills. The firm's annual opportunity rate is 5%. The fixed cost of transferring money is $75 per transfer. Based on historical data, the standard deviation of the weekly cash flows is $295,000 and the lower cash balance limit is $300,000. Using the Miller-Orr model, and assuming the interest rate is 0.094% per week, what is the optimum upper limit?
A)$699,991
B)$622,455
C)$756,507
D)$799,230
E)$819,996





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