Question: Suppose that interest rates double. a. What, according to the Baumol model, would happen to the firms average cash balances? b. Recalculate the gain from

Suppose that interest rates double.

a. What, according to the Baumol model, would happen to the firm’s average cash balances?

b. Recalculate the gain from operating the lock-box system described in Section 31.1 given the new level of interest rates.

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