Which money market model establishes optimal cash transfer limits by incorporating daily cash flow variance and transfer costs?
ABaumol-Allais-Tobin (BAT) Model
BMiller-Orr Model
CBlack-Scholes Model
DEconomic Order Quantity (EOQ) Model
Explanation
* The Miller-Orr Model sets upper and lower cash balance limits for firms with unpredictable daily cash flows.
* When cash reaches the upper boundary, excess is invested in marketable securities; when cash reaches lower boundary, securities are sold.
* BAT Model assumes completely predictable cash flow demands.
Exam Relevance
- Topic: Working Capital Management
- Subtopic: Cash Management Models
No Comments