Assuming That the Interaffiliate Cash Flows Are Uncorrelated with One

Assuming that the interaffiliate cash flows are uncorrelated with one another,calculate the minimum cash balance to have if the firm follows a conservative policy of having three standard deviations of cash for precautionary purposes. $$\begin{array} { l c c } \text { Affiliate } & \begin{array} { r } \text { Expected } \\\text { Transactions }\end{array} & \begin{array} { c } \text { Standard } \\\text { Deviation }\end{array} \\\hline \text { U.S. } & \$ 100,000 & \$ 40,000 \\\text { Canada } & \$ 150,000 & \$ 60,000 \\\text { Mexico } & \$ 175,000 & \$ 30,000 \\\text { Chile } & \$ 200,000 & \$ 70,000\end{array}$$

A) $34,960.33
B) $314,642.65
C) $104,880.88
D) None of the above

Correct Answer:

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