We consider the question of how much cash should be held by an investment fund for transactions purposes. Cash is needed to meet redemptions and rights offerings; it is generated by dividends and contributions. It is assumed the cumulative cash flow follows a random walk, perhaps with a drift....

This paper examines the optimal capital structure of a firm which can choose both the amount and maturity of its debt. Bankruptcy is determined endogenously rather than by the imposition of a positive net worth condition or by a cash flow constraint. The results extend Leland's [1994]...