BullsNBears, a Purveyor of Financial Databases, Estimates It They Disburses

question 74

Multiple Choice

BullsNBears, a purveyor of financial databases, estimates it they disburses $440,000 monthly in order to pay bills. The firm's opportunity rate is 5%. The fixed cost of transferring money is $25 per transfer. Based on historical data, the standard deviation of monthly cash flows is $15,000 and the lower cash balance limit is $20,000. For Miller-Orr model questions, assume the interest rate is 0.5% per month.

Using the BAT model, what is the opportunity cost of holding cash?

• A) $1,817
• B) $1,923
• C) $2,405
• D) $2,664
• E) $3,111

---

Definitions:

Application Service Provider

A business providing computer-based services to customers over a network, such as access to a particular software application.

Printer Driver

Software that communicates between a computer and a printer, converting data to be printed into a format that the printer can understand.

Computer Hardware

The physical components of a computer system, such as the CPU, RAM, and hard drives.

Expert System

A computer program that uses artificial intelligence techniques to simulate the judgment and behavior of a human or an organization with expert-level knowledge in a specific field.