Which of the Following Is True of the Baumol Model

Multiple Choice

Which of the following is true of the Baumol model? Note that the optimal cash transfer amount is C*.

A) If the total amount of cash needed during the year increases by 20%, then C* will increase by 20%.
B) If the average cash balance increases by 20%, then the total holding costs will increase by 20%.
C) If the average cash balance increases by 20% the total transactions costs will increase by 20%.
D) The optimal transfer amount is the same for all companies.
E) If the fixed costs of selling securities or obtaining a loan (cost per transaction) increase by 20%, then C* will increase by 20%.