A. Precautionary motive
B. Transactionary and Precautionary motive
C. Speculative motive
D. Speculative and Transactionary motives
Correct Answer:
Option C – Speculative motive
Explanation
Speculative motive: A desire to hold cash in order to be poised to exploit any attractive investment opportunity requiring a cash expenditure that might arise.
- We hold cash rather than other assets whose values are falling.
- We hold on to cash to be able to buy them when their prices actually fall.
- So this is money held to play the market.
- It is money held to buy (or sell) bonds, depending on one’s expectations of future interest rates.
