Joe's Burgers Would Like to Maintain Their Cash Account at a Minimum

question 87

Multiple Choice

Joe's Burgers would like to maintain their cash account at a minimum level of $300,000, but expects the standard deviation in net daily cash flows to be $20,000; the effective annual rate on marketable securities to be 5.2 percent per year; and the trading cost per sale or purchase of marketable securities to be $22.50 per transaction. What will be their optimal upper cash limit?

• A) $320,000.00
• B) $336,492.68
• C) $409,478.04
• D) $1,009,478.04

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Definitions:

Express Statements

Clearly articulated and directly communicated declarations or assertions.

Implied Warranty of Fitness

An assurance that a product will meet a buyer’s specified purpose when the seller knows the particular purpose for which the buyer will use the goods.

Survival Hike

An outdoor adventure aimed at testing or improving the skills necessary to survive in wilderness conditions.

Personal Injury

Physical or psychological harm to a person resulting from the negligence, recklessness, or intentional misconduct of another party.