This paper presents the summary results and the conclusion drawn from the results of the investigation of a business problem. The problem was investigated through the application of analysis of variance (ANOVA) procedures.
The company that is the focus of this investigation has developed cash balances that exceed the immediate working capital needs of the company. Within a year, however, the company anticipates that the cash will be required to support operations.
In the intervening period, the company's business problem related to the excess cash balances is how best to invest the excess funds. The investment criteria are as follows:
Preserve the principal value of the funds
Assure liquidity within a six-to-12 month timeframe
Optimize earnings on funds invested by balancing yield rate and yield volatility concerns
The proposed solution for the investment of the company's excess cash balances is to invest the funds in short-term United States Treasury bills. United States Treasury bills fulfill the criterion of preserving the principal value of the funds, as United States Treasury obligations are the lowest risk investment options available.
The solution alternatives are (a) four-week United States Treasury bills, (b) three-month United States Treasury bills, and (c) six-month United States Treasury bills. Each of these alternative investment vehicles fulfills the criterion of
Assessing Return and Volatility Concerns Related to the Three Investment Vehicles
Assessing the return and volatility issues related to the three alternative investment vehicles was accomplished by applying ANOVA procedures to relevant data. A decision was made to collect rate of return data for each of the investment vehicles on a monthly basis for the most recent 48-month for which data are available. Thus, data were collected for the inclusive period August 2001 - July 2005. The data are presented in Table 1, which may be fo...