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JadeDeLair JadeDeLair
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9 months ago
Which statement best describes compensating balances?


▸

Compensating balance requirements apply only to businesses, not to individuals.



▸

Compensating balances are essentially costless to most firms, because those firms would normally have such funds on hand to meet transactions needs anyway.



▸

If the required compensating balance is larger than the transactions balance the firm would ordinarily hold, then the effective cost of any loan requiring such a balance is increased.



▸

Banks are prohibited from earning interest on the compensating balances they hold.

Textbook 
Financial Management: Theory and Practice

Financial Management: Theory and Practice


Edition: 4th
Authors:
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apontea13apontea13
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9 months ago
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