The following formula is used in determining its optimal level of cash. Assume that the fixed cost of selling marketable securities is P10 per transaction and the interest rate on marketable...

The following formula is used in determining its optimal level of cash. Assume that the fixed cost of selling marketable securities is P10 per transaction and the interest rate on marketable securities is 6% per year. The company estimates that it will make cash payments of P12,000 over a 1-month period. What is the average cash balance (rounded to the nearest peso)?

(check the attached photo)

choose the letter of the correct answer

a. P1,732.00
b. P3,464.00
c. P6,928.00
d. P8,660.00
e. P15,588.00

Extracted text: 26T C* = ! 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* = optimal level of cash