Baumol Model. The following formula is used in determining its optimal level of cash: where b= the fixed cost of a transaction T= the total cash needed for the time period involved i = the interest...

Baumol Model. The following formula is used in determining its optimal level of cash:

where b= the fixed cost of a transaction

T= the total cash needed for the time period involved

i = the interest rate on marketable securities

C= cash balance

C= cash balance

Assume that the fixed cost of selling marketable securities is $10 per transaction and the interest rate on marketable securities is 6% per year. The company estimates that it will make cash payments of $12,000 over a 1-month period. What is the average cash balance (rounded to the nearest dollar)? (CFM adapted.)