The optimal cash replenishment level will decrease with all of the following changes except ____.
A) The transaction cost decreases
B) The annual demand for cash decreases
C) The interest rate decreases
D) All of these will decrease the optimal cash replenishment level.

Question

Quizplus · Accepted Answer

A decrease in the interest rate would not decrease the optimal cash replenishment level; it would actually increase it, as the opportunity cost of holding cash is lower.

The Optimal Cash Replenishment Level Will Decrease with All of the Following