What are the possible ways that the bank can meet an expected net deposit drain of +4 percent using stored liquidity management techniques?
A)Liquidate all cash holdings.
B)Utilize further the Fed funds market.
C)Liquidate some securities and/or loans.
D)Liquidate all cash and use more Fed funds.
E)All of the options are suitable techniques.

Question

Quizplus · Accepted Answer

Liquidating some securities and/or loans may be the best option to meet the expected net deposit drain of +4 percent as it allows the bank to maintain some level of liquidity while also raising funds to meet the drain. Liquidating all cash holdings or using only the Fed funds market may lead to a lack of liquidity and potential difficulties in meeting other obligations. Using both options (C and B) may also be suitable if necessary.

What Are the Possible Ways That the Bank Can Meet