Tetu Ltd has estimated that the standard deviation of its daily net cashflows is shs. 3000. The firm pays shs. 100 in transaction costs to transfer funds into and out of the money market. The rate of...

Extracted text: Tetu Ltd has estimated that the standard deviation of its daily net cashflows is shs. 3000. The firm pays shs. 100 in transaction costs to transfer funds into and out of the money market. The rate of interest in the money market is 9% per annum. Required: (i). Explain some of the underlying decision rules that the firm can use to set its target cash balances.