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 strong relative to the other.
C)of high interest rates existing in one country and because one country's currency may be strong relative to the other.
D)None of the options

Question

Quizplus · Accepted Answer

A multinational company may prefer to hold sizeable cash balances in one currency rather than another because of two reasons - high interest rates existing in one country and because one country's currency may be strong relative to the other. Holding cash balances in a currency with higher interest rates can earn the company more interest income, and holding a currency that is strong relative to others can help the company avoid currency fluctuations and exchange rate risks. Therefore, both options A and B can be valid reasons for holding cash balances in a particular currency.

A Multinational Company May Prefer to Hold Sizeable Cash Balances