A primary purpose of restricting the investment of idle cash balances to money market instruments is to:

Question

Quizplus · Accepted Answer

The primary purpose of investing idle cash balances in money market instruments is to minimize interest rate risk. Money market instruments have a low maturity and are typically issued by creditworthy and stable institutions, reducing the risk of default. Additionally, these instruments are highly liquid, enabling the company to easily convert the investment into cash if necessary. By investing in short-term money market instruments, the company is protected from changes in interest rates, which could negatively impact longer-term investments.

A Primary Purpose of Restricting the Investment of Idle Cash