Let's assume that your baumol-tobin model is $ 54,000 a year. The annual interest rate of the savings deposit account is 2.5% and we assume that you keep your income in your account.

1- Assume you go to the bank 4 times a month, how many times do you go to the bank in total?

2- How much money do you keep on average for a year?

3- Now, every time you go to the bank, let F cost $ 0.42. how much is the total cost of keeping your income?

4- Optimal number of trips to the bank for one year based on your income, considering savings deposits, interest rates and the cost of each trip to the bank. What is N * (ie the number of visits to the bank that will minimize the cost of wanting to keep cash in your hand)?

5-according to N* that you calculated it in (4) Calculate the amount of money you will keep on average.

Answer rating: 100% (QA)

The BaumolTobin model is a model that helps determine the optimal amount of cash to hold for a given ... View the full answer