Determining the appropriate cash balance involves assessing the trade-off between:

Question

Quizplus · Accepted Answer

The appropriate cash balance depends on balancing the benefits of having easily accessible cash with the costs of holding onto cash that could be invested to earn higher returns. This is the trade-off between liquidity and the benefits of investing. Therefore, the correct choice is B. The other options do not accurately capture the trade-off between having cash and investing it.

Determining the Appropriate Cash Balance Involves Assessing the Trade-Off Between