Reasons for Holding Cash Speculative motive-hold cash to take advantage of unexpected opportunities Precautionary motive-hold cash in case of emergencies Transaction motive-hold cash to pay the day-to- day bills Trade-off between opportunity cost of holding cash relative to the transaction cost of converting marketable securities to cash for transactions2 Reasons for Holding Cash n Speculative motive – hold cash to take advantage of unexpected opportunities n Precautionary motive – hold cash in case of emergencies n Transaction motive – hold cash to pay the day-to- day bills n Trade-off between opportunity cost of holding cash relative to the transaction cost of converting marketable securities to cash for transactions