+1 862 207 3288 This model analysis cost and benefits of holding money. The benefit of holding money is that it helps in carrying out transaction whereas the cost of holding money is the interest (r) foregone if that money was saved. If the money is saved in the bank, then a person has to make visits to bank to withdraw cash to carry out transactions which is termed as the “broker’s cost (b)”. Therefore, the total cost of holding money will be the sum of interest foregone and the broker’s cost. The number of time this broker’s fee is borne by the individual is equal to the amount of income (Y) of the person divided by the amount of average cash holdings (C) obtained on each trip to bank.
