What is the opportunity cost of holding money?

Answered by Catherine Caldwell

The opportunity cost of holding money is the benefit, which could be obtained if the money would be invested, so it is equal to the percentage of investment profit. Holding money does not bring any income, but it is justified in some cases, for instance, if a company need to have assets that have to be ready to be put into circulation at any time, while investing, which is positive for business, deprives financial freedom to a certain extent.