We appreciate your visit to The opportunity cost of holding an excess cash balance is mcq CHoICES the cost of holding inventory the fed funds rate multiplied by the days. This page offers clear insights and highlights the essential aspects of the topic. Our goal is to provide a helpful and engaging learning experience. Explore the content and find the answers you need!
Answer :
The opportunity cost of holding an excess cash balance is the potential interest income that could have been earned from the next best use of the funds, such as investing or using the funds for productive purposes.
The correct answer to the question "The opportunity cost of holding an excess cash balance is:" is "the interest income from the next best use of the funds."
Opportunity cost refers to the value of the best alternative that is given up when a choice is made. In this case, when a company or individual holds an excess cash balance, they are forgoing the potential interest income that could be earned if the funds were invested or used for other purposes.
To understand this concept better, let's consider an example. Let's say you have $10,000 in excess cash that you decide to keep in a savings account that earns an annual interest rate of 2%. If you had invested that $10,000 in stocks instead, and the stock market generated a return of 8%, the opportunity cost of holding the excess cash balance would be the difference between the interest income earned from the savings account (2%) and the potential return from the stock market (8%). In this case, the opportunity cost would be 6%.
To know more about cost of holding refer here:
brainly.com/question/31236493
#SPJ11
Thanks for taking the time to read The opportunity cost of holding an excess cash balance is mcq CHoICES the cost of holding inventory the fed funds rate multiplied by the days. We hope the insights shared have been valuable and enhanced your understanding of the topic. Don�t hesitate to browse our website for more informative and engaging content!
- Why do Businesses Exist Why does Starbucks Exist What Service does Starbucks Provide Really what is their product.
- The pattern of numbers below is an arithmetic sequence tex 14 24 34 44 54 ldots tex Which statement describes the recursive function used to..
- Morgan felt the need to streamline Edison Electric What changes did Morgan make.
Rewritten by : Barada
