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

When the interest rate decreases, the optimal cash replenishment level increases, as the opportunity cost of holding cash decreases. Therefore, the answer is that the optimal cash replenishment level will not decrease when the interest rate decreases.

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