Your firm has a net cash inflow forthe quarter of $40. The beginningcash balance is $120. Companypolicy is to maintain a minimum cashbalance of $100. The firm borrowsonly the amount that is necessary tomaintain that balance. If it has anysurplus funds, it invests in moneymarket instruments. The firmsurplus.to have a zero cumulative

Surplus refers to an amount that is in excess of the required amount to maintain the minimum balance…

Answered: Your firm has a net cash inflow for the…

Business

Finance

Your firm has a net cash inflow for the quarter of $40. The beginning cash balance is $120. Company

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Concept explainers

Cash budget

A cash budget is an estimate of an organization's cash flow for the future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future. If cash receipts are insufficient to cover future expenses, an organization may plan to obtain funds from other sources. After estimating the sales, purchase, and capital expenditure budgets for the year, management develops a cash budget. These budgets are created to ensure that an organization's cash flow is managed. It is important to note that only cash transactions are recorded when actual cash enters and exits an organization.

Question

Your firm has a net cash inflow for
the quarter of $40. The beginning
cash balance is $120. Company
policy is to maintain a minimum cash
balance of $100. The firm borrows
only the amount that is necessary to
maintain that balance. If it has any
surplus funds, it invests in money
market instruments. The firm
surplus.
to have a zero cumulative

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Consider a bank with the following balance sheet (M means million): (Image attached as Q3) If the interest rates go up by 1%, using the duration and convexity rule, determine the net worth of the bank and the equity to asset ratio. ALSO In above scenario, to maintain the equity to asset ratio at 40% which is required by the regulation, the bank decides to raise cash (zero duration and zero convexity) from the equity holders. How much cash does the bank need to raise?
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