GFOA Exam CPFO Topic 1 Question 76 Discussion

Actual exam question for GFOA's CPFO exam

Question #: 76
Topic #: 1

[All CPFO Questions]

The Unites Way receives $1,500,000 in funds in a lump sum at the beginning of the year and has constant cost and predictable annual cash outlays. Eight percent is estimated to be earned at securities with each security transaction costing $40 plus 0.5 percent of the dollar amount received. What will be the optimum security scale using Baumol Model?

A$38700

B$38730

C$38830

DNone of these

Show Suggested Answer

Suggested Answer: A

by Valentin at Oct 18, 2023, 04:38 AM

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Stephaine

1 months ago

I feel like the Baumol Model is just a fancy way of saying 'How to make the most of your money while spending the least on transaction fees.' I'm going with C) $38,830 - it's the answer that sounds the most like it was calculated by a robot, which is probably the right way to go here.

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Sue

1 months ago

This question is making my head spin. Why can't they just ask something simple, like 'What's the meaning of life?' Oh, wait, that's even harder. Anyway, I'm going with D) None of these, because why not?

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Ben

1 months ago

Okay, let's break this down. We've got a lump sum of $1.5 million, 8% interest, and transaction costs. I'm leaning towards A) $38,700, but I'm open to being convinced otherwise.

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Amber

13 days ago

C) Yeah, A) $38,700 is the optimum security scale based on the Baumol Model calculations.

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Sabine

17 days ago

B) I agree, A) $38,700 makes the most sense given the information provided.

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Julio

19 days ago

A) $38,700 seems like the best option considering the interest and transaction costs.

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3 months ago

I think the answer is A) $38700.

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