Which of the following is a mechanism used by DI managers to impact withdrawal rates of NOW accounts.
A)Implicit interest payments.
B)Minimum balance requirements.
C)Explicit interest payments.
D)All of the above.
E)There is no way to impact withdrawal rates.

Question

Quizplus · Accepted Answer

DI managers can use all of the above mechanisms to impact withdrawal rates of NOW accounts. Implicit interest payments can discourage withdrawals because account holders forfeit accrued interest if they withdraw too early, while minimum balance requirements can create a disincentive to withdraw funds below a certain threshold. Explicit interest payments can also incentivize account holders to keep their funds in the account for longer, as they will earn more interest over time. Therefore, using a combination of these mechanisms can help DI managers adjust withdrawal rates and manage their liquidity risk.

Which of the Following Is a Mechanism Used by DI