Your Firm Spends $21,000 a Week to Pay Bills and Maintain

question 307

Multiple Choice

Your firm spends $21,000 a week to pay bills and maintain a lower cash balance limit of $20,000. The standard deviation of the disbursements is $5,000. The applicable weekly interest rate is.065 % and the fixed cost of transferring funds is $45. What is your cash balance target based on the Miller-Orr model?

• A) $30,908
• B) $31,212
• C) $31,336
• D) $31,407
• E) $31,511

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Definitions:

Balance Theory

A psychological theory proposing that individuals strive for psychological consistency in their relationships and beliefs, leading them to change attitudes or relationships to maintain balance.

Relationships

Connections or associations between people, based on kinship, love, solidarity, professional interactions, or other social commitments.

Aronson and Carlsmith

Researchers known for their work in social psychology, particularly for studies on cognitive dissonance.

Punishment

Punishment involves the application of an adverse event or condition in response to unwanted behavior, aiming to reduce or eliminate that behavior.