Assuming That the Firm Can Either Hold Cash Paying No

Multiple Choice

Assuming that the firm can either hold cash paying no interest or invest in marketable securities,which of the following might induce the manager to hold higher cash balances?

A) The cost of borrowing is high relative to interest rates on marketable securities.
B) Future cash flows are relatively predictable.
C) The cost of cash balances is relatively high.
D) Bank interest rates are expected to increase.