The Timberline fiRm Expects a Total Need of €12,500 Over

question 106

Multiple Choice

The Timberline firm expects a total need of €12,500 over the next 3 months.They have a beginning cash balance of €1,500, and cash is replenished when it hits zero.The fixed cost of selling
Securities to replenish cash balances is €3.50.The interest rate on marketable securities is 8% per
Annum.There is a constant rate of cash disbursement and no cash receipts during the month.
If interest rates were to rise to 12.00% per annum, what would be the firm's optimum cash balance
Using the Baumol model?

• A)€295.81
• B)€853.91
• C)€1,024.70
• D)€2,958.04
• E)None of the above.

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Definitions:

Breakup Rate

The frequency or likelihood of relationships ending over a specified period, often used in the context of romantic partnerships.

Same-Sex Couples

Relationships involving two individuals of the same sex, either legally recognized as a marriage or akin to marriage.

Heterosexual Couples

Pairs of individuals of the opposite sex who are in a romantic and/or sexual relationship with each other.

Cohabitation

Refers to the living arrangement where two people who are not married live together in an intimate relationship.