The variance of the daily cash flows for the Pele Bicycle Shop is $890,000. The opportunity...

The variance of the daily cash flows for the Pele Bicycle Shop is $890,000. The opportunity cost to the firm of holding cash is 4.1 percent per year. What should the target cash level and the upper limit be if the tolerable lower limit has been established as $160,000? The fixed cost of buying and selling securities is $300 per transaction.

A. C*=$172,106.86; H*=$196,520.59

B. C*=$172,206.86; H*=$196,620.59

C. C*=$173,206.86; H*=$197,620.59

D. C*=$175,206.86; H*=$199,620.59

Expert Solution

ANSWER : B : C* = $172206.86, H* = 196620.59

jeff jeffy answered 5 months ago

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