A primary purpose of restricting the investment of idle cash balances to money market instruments is to:
A) obtain government guarantees on the investment.
B) minimize transaction costs.
C) carry a minimal amount of interest-rate risk.
D) have a continual market for selling the investment.

Question

Quizplus · Accepted Answer

Money market instruments typically have low interest-rate risk because they are short-term instruments. By investing in these instruments, an organization can minimize the potential impact of fluctuations in interest rates on their idle cash balances.

A Primary Purpose of Restricting the Investment of Idle Cash