Businesses Hold Substantial Balances in Demand Deposits for All of the Following

question 34

Multiple Choice

Businesses hold substantial balances in demand deposits for all of the following reasons EXCEPT

• A) they cannot hold NOW accounts.
• B) the existence of low transactions costs.
• C) to maintain liquidity.
• D) relatively high interest rates.

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Definitions:

Payback Analysis

A financial analysis method used to determine the time required to recoup the cost of an investment or project.

NPV

An evaluation method used to assess the profitability of an investment by calculating the difference between its current cash inflows and outflows, discounted to their present values.

IRR

Internal Rate of Return represents a financial measure for assessing the potential profitability of investments.