Stellar Shoes Would Like to Maintain Their Cash Account at a Minimum

question 88

Multiple Choice

Stellar Shoes would like to maintain their cash account at a minimum level of $25,000, but expects the standard deviation in net daily cash flows to be $2,000; the effective annual rate on marketable securities to be 5 percent per year; and the trading cost per sale or purchase of marketable securities to be $100 per transaction. What will be their optimal upper cash limit?

• A) $27,000
• B) $38,092.34
• C) $114,277.02
• D) $64,277.02

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Definitions:

Realistic Expectations

Anticipations or beliefs about future events or results that are based on practical and factual grounds, rather than on wishful thinking or idealism.

Communication

The exchange of information, thoughts, messages, or emotions between individuals or groups through spoken words, writings, behaviors, or symbols.

Family Therapy

A type of psychotherapy that involves treating a family system rather than individual members, aiming to improve communication and resolve conflicts.

Reduce Guilt

The process or actions taken to lessen feelings of responsibility or remorse for perceived wrongs or mistakes.