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

question 256

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 Miller-Orr model, what is the average cash balance?

• A) $32,599
• B) $36,539
• C) $42,966
• D) $44,719
• E) $58,243

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