Asked by Shariar Mohammed on Jul 15, 2024
Verified
In regards to the Miller-Orr Model, the higher the interest rate, the lower the target cash balance.
Miller-Orr Model
A financial model that helps in managing cash flows and cash reserves of firms, focusing on maintaining an optimal balance level.
Interest Rate
The percentage charged on a loan or paid on deposits over a specific period, reflecting the cost of borrowing or the gain on savings.
Target Cash Balance
The ideal amount of cash that a company aims to hold to meet operational and transaction needs while minimizing holding costs.
- Gain an insight into the elements that determine the optimum cash level and the theoretical underpinnings of models related to cash transactions and interest rate fluctuations.
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Learning Objectives
- Gain an insight into the elements that determine the optimum cash level and the theoretical underpinnings of models related to cash transactions and interest rate fluctuations.
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