17-90 What are the possible ways that the bank can meet an expected net deposit drain of +4 percent using stored liquidity management techniques?

Question

Quizplus · Accepted Answer

Liquidating some securities and/or loans would free up some cash to meet the expected net deposit drain while still retaining a portion of the bank's assets. Option A, liquidating all cash holdings, would leave the bank with no cash for future transactions, option B, utilizing further the Fed funds market, may have limitations especially during times of financial stress, and option D, liquidating all cash and using more Fed funds, may pose some liquidity risk. Therefore, option C is the most suitable technique.

17-90 What Are the Possible Ways That the Bank Can