1. Using Baumol-Tobin transactions demand model, answer the following questions
   1. Derive the square-root formula of the Baumol-Tobin transactions demand model. Then explain how this formula can be used to explain the fact that high-income individuals on average hold a smaller proportion of their income in money assets than low-income people.
   2. Determine the optimal strategy for cash management for a person who earns RM1,600 per month, can earn 0.5% interest per month in a saving account, and has a transaction costs of RM1.
   3. Show why for many people, it is optimal to make only one transaction between bonds and money.
   4. Financial innovation raises the income velocity of money.