The Eliot Co

question 5

Multiple Choice

The Eliot Co. needs $210,000 a week to pay bills. The standard deviation of the weekly disbursements is $24,000. The firm has established a lower cash balance limit of $90,000. The applicable interest rate is 4 % and the fixed cost of transferring funds is $60. Based on the BAT model, what is the optimal initial cash balance?

• A) $36,199
• B) $43,267
• C) $61,188
• D) $127,984
• E) $180,997

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Definitions:

Free Trade

is a policy followed by some international markets in which countries' governments do not restrict imports from, or exports to, other countries.

Domestic Jobs

Employment opportunities within a country's borders, as opposed to jobs located overseas.

Free International Trade

The exchange of goods and services between countries without the imposition of restrictions such as tariffs, quotas, or subsidies.

Producer Surplus

The difference between what producers are willing to accept for a good or service and the higher price they actually receive.