Exhibit 23.1 The Duckett Group Is Trying to Determine Its Optimal Average

question 26

Multiple Choice

Exhibit 23.1
The Duckett Group is trying to determine its optimal average cash balance. The firm has determined that it will need $5,000,000 net new cash during the coming year. The fixed transaction cost of converting securities to cash is $50, and the firm earns 10 percent on its marketable securities investments.
-Refer to Exhibit 23.1.According to the Baumol model,what is the optimal transaction size for transfers from marketable securities to cash?

• A)$7,071
• B)$38,357
• C)$70,711
• D)$102,956
• E)$87,000

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A downturn in the economy.

Equilibrium Price

The price at which the quantity of a good demanded by consumers equals the quantity supplied by producers, resulting in market balance.

Equilibrium Quantity

Equilibrium Quantity is the quantity of goods or services that is supplied and demanded at the equilibrium price, where market supply and demand balance.