Question

what are the reasons for holding cash.

Answer 1

There are Three Main Reasons Why People Hold Money

Financial specialists have distinguished three wide thought processes:

a). The exchanges intention:

People need to make everyday exchanges (purchase nourishment, Clothes and so forth.) and thusly need to grasp money. Obviously, the expanding Spread of plastic cash (Visas) has significantly lessened the exchanges motivating force for holding cash. Accepting no plastic cash, a person's exchanges interest for cash is probably going to increment with his/her salary, as s/he will probably make more exchanges in the event that he feels more extravagant.

b). Prudent thought process:

notwithstanding cash held for making exchanges, individuals now and then hold cash for preparatory purposes too: i.e. to meet any critical or sudden consumption needs, or to "grab a deal" that may be taken by another person. Once more, prudent interest for cash is probably going to increment with pay

c). Resources thought process (additionally called theoretical or ventures rationale):

Not with standing an and b, individuals may wish to keep some money to switch between different speculations. So consider a man who claims some land, holds a few securities, and has some securities exchange ventures. Suppose he detects a decent venture opportunity on the share trading system however doesn't have moment purchasers for the land or bonds he holds. In this circumstance some extra trade out hand would have helped him secure the value resource. The advantages interest for cash is probably going to increment with wage (for reasons like those for an and b) and decline with loan fees (in light of the fact that the financing cost is the open door cost of grasping money).