If a USimporter Has to Write a $200 Check to Cover a Cover

question 220

Multiple Choice

If a U.S.importer has to write a $200 check to cover a 20,000 yen purchase from Japan,the exchange rate is

• A)200 yen to a dollar.
• B)100 yen to a dollar.
• C)20 yen to a dollar.
• D)10 yen to a dollar.
• E)200 dollars to a yen.

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Definitions:

Lower Cash Balance Limit

The minimum amount of cash that a business aims to maintain in its cash reserves to meet emergency or operational needs.

Miller-Orr Model

The Miller-Orr Model is a financial model used to manage cash flow and determine the optimal balance between holding cash versus short-term investments.

Disbursements

Payments made by a business, often related to operational expenses or loan repayments.

Optimal Average Cash Balance

The ideal level of cash a company seeks to maintain to minimize the costs associated with holding too much or too little cash.