Question

Sherman Peabody earns a monthly salary of ​$1,500​, which he receives at the beginning of each month. He spends the entire amount each month at the rate of ​$50 per day.​ (Assume 30 days in a​ month.) The interest rate paid on bonds is 6 percent per month. It costs ​$4 every time Peabody sells a bond. The optimal average level of money holdings is the amount that _________.

Answer 1

Answer: A. maximizes the profits from money management.

Explanation:

The optimal average level of money is indeed the amount that maximises profit from money management.

Money management is essentially taking charge of your money and ensuring that you manage it in such a way as to limit unnecessary expenses whilst growing money through measures such as budgeting, investing and expenses tracking.

With Mr Peabody's income and other financial constraints, the optimal average level of money will be the most he can maximise from managing his money.