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NEW QUESTION: 1
All of the following are valid reasons for a business to hold cash and marketable securities, except to:
A. Earn maximum returns on investment assets.
B. Maintain a precautionary balance.
C. Satisfy compensating balance requirements.
D. Maintain adequate cash needed for transactions.
Choice "d" is correct. There are three primary motives for holding cash:
1 . Transactions demand
2 . Precautionary demand
3 . Speculative demand
However, cash is generally held in very short-term liquid investments which are low risk, low return.