Which of the following is true of the Baumol model? Note that the optimal cash transfer amount is C*?
A) If the fixed costs of selling securities or obtaining a loan (cost per transaction) increase by 20%, then C* will increase by 20%
B) If the total amount of cash needed during the year increases by 20%, then C* will increase by 20%.
C) If the average cash balance increases by 20%, then the total holding costs will increase by 20%.
D) If the average cash balance increases by 20% the total transactions costs will increase by 20%.
E) The optimal transfer amount is the same for all companies.

Question

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The Answer of Which of the following is true of the Baumol model? Note that the optimal cash transfer amount is C*?
A) If the fixed costs of selling securities or obtaining a loan (cost per transaction) increase by 20%, then C* will increase by 20%
B) If the total amount of cash needed during the year increases by 20%, then C* will increase by 20%.
C) If the average cash balance increases by 20%, then the total holding costs will increase by 20%.
D) If the average cash balance increases by 20% the total transactions costs will increase by 20%.
E) The optimal transfer amount is the same for all companies.

Which of the Following Is True of the Baumol Model