Question

Yesterday, the president of RB Enterprises received a phone call from DLK, a competitor. DLK is a sole proprietorship. An unexpected family situation has caused the owner to suddenly want to retire and relocate closer to his family. Thus, the assets of DLK are being offered to RB Enterprises at a bargain basement price. While RB Enterprises had not anticipated purchasing these assets, it was decided that the opportunity was too good to pass up. This illustrates which of the following needs to hold cash?
A. precautionary
B. transaction
C. speculative
D. compensation
E. float

Answer 1

Answer:

Speculative

Explanation:

Investors/ traders normally use this tactic to hold cash so as to make the best use of any investment opportunity that may come up

Keeping all money invested doesn't always provide the best solution  all the time. Maintaining some  amount of liquidity in one's portfolio is one of the top priorities for an investor. Generally, investors keep a fair amount of such cash with them so as to earn higher profits.

.In such a situation as RB enterprises was put in , the cash kept  aside by the them equips him to exploit such an attractive investment opportunity. This is known as speculative motive.