Genentech Corporation by analyzing its Weekly balances in its checking account

Question: #540

1.Genentech Corporation, by analyzing its weekly balances in its checking account, has determined that the variance of cash flows is $3,000,000. Further, the cost of transferring money from the checking account to a money market account is $65 per transfer. The interest on the checking account is 1%, while that on the market account is 6%. Genentech wants to keep $5,000 as a minimum balance in the checking account. Find the annual cost of interest forgone.

2.Miller-Orr, Excel: New Jersey Company has recorded the following balances in its checking account for 15 consecutive Wednesdays:

Week no. Balance Week no. Balance Week no. Balance
1 $11,347 6 $23,343 11 $13,907
2 $12,525 7 $17,673 12 $13,623
3 $16,003 8 $15,985 13 $15,249
4 $17,056 9 $12,078 14 $18,466
5 $21,732 10 $10,049 15 $19,567

What is σ, the standard deviation of the net cash flows?

3.Treasury Securities: Nevada Company has bought T-bills with face amount $5.45 million, with a discount of 4.73%, and time to maturity 73 days. Find its bond equivalent yield, and its yield as a zero coupon bond.
4.84%, 4.94% ♥