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What is Optimal Money Holdings Analysis about?

The document shows data on average money holdings, bond holdings, interest earned, cost of switching, and net profit for different numbers of switches and interest rates of 10%, 15%, and 20%. The optimal money holdings decreases as the interest rate increases, being $187.50 at 10%, $150.00 at 15%, and $125.00 at 20%. There is an inverse relationship between the amount of money held and the interest rate, as higher interest rates make it more profitable to hold fewer money balances and more bonds.

Author

Nhica de la Merced

Language

EN