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According to the baumol-tobin model of cash management

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Reference no: EM132051690

According to the Baumol-Tobin model of cash management the combined opportunity and transaction cost of holding currency is C= FN + i Y/2N

  1. Differentiate C with regards to N
  2. Find the 1st order condition for the optimal value of N, that is N*
  3. Check the 2nd order condition to confirm that total costs are minimized at N*

Reference no: EM132051690

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