What Effect Does Increasing the Standard Deviation in Daily Cash

question 18

Multiple Choice

What effect does increasing the standard deviation in daily cash flows have on the cash return point in the Miller-Orr model?

• A) It will cause the cash return point to increase.
• B) It will cause the cash return point to decrease.
• C) It has no impact on the cash return point.
• D) It will cause the cash return point to first increase, then decrease.

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Definitions:

Point Estimate

A single value given as an estimate of a population parameter that is unknown.

Population Parameter

A numerical value that describes a characteristic of an entire population, such as the mean or standard deviation.

Point Estimate

A single value given as the best guess or estimate of a population parameter based on sample data.

Interval Estimate

An interval estimate is a range of values derived from sample statistics that is likely to contain the value of an unknown population parameter.