A multinational company may prefer to hold sizeable cash balances in one currency rather than another because
A) of high interest rates existing in one country.
B) one country's currency may be weak relative to the other.
C) the company is looking to do business in the country with that currency in the future.
D) all of the options are true.

Question

Quizplus · Accepted Answer

All of the options may be true and could potentially influence a multinational company's decision to hold cash balances in one currency over another. High interest rates in a particular country could make holding that currency more attractive for earning interest income. A weak currency could also be advantageous for a company that imports goods from that country as it would make their imports relatively cheaper. Finally, if a company has future business plans in a particular country, it may make strategic sense to hold cash balances in that country's currency.

A Multinational Company May Prefer to Hold Sizeable Cash Balances