HotFoot Shoes would like to maintain its cash account at a minimum level of $42,000, but expects thestandard deviation in net daily cash flows to be $5,700, the effective annual rate on marketable securities tobe 5.8 percent per year, and the trading cost per sale or purchase of marketable securities to be $130 pertransaction.What will be its optimal cash return point? (Use 365 days a year. Do not round intermediate calculationsand round your answer to 2 decimal places.)Optimal cash return point$

Given:cash account at a minimum level of $42,000 = Lnet daily cash flows to be $5,700 = marketable…

Answered: What will be its optimal cash return…

What will be its optimal cash return point? (Use 365 days a year. Do not round intermediate calculations and round your answer to 2 decimal places.)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

HotFoot Shoes would like to maintain its cash account at a minimum level of $42,000, but expects the
standard deviation in net daily cash flows to be $5,700, the effective annual rate on marketable securities to
be 5.8 percent per year, and the trading cost per sale or purchase of marketable securities to be $130 per
transaction.
What will be its optimal cash return point? (Use 365 days a year. Do not round intermediate calculations
and round your answer to 2 decimal places.)
Optimal cash return point
$

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