The Concept of Constrained Optimization Facing an FI Manager Involving

question 20

Multiple Choice

The concept of constrained optimization facing an FI manager involving the minimum amount of liquid reserve assets required by regulators may

• A)penalize the FI if the minimum amount is less than the amount warranted by the actual withdrawal risk.
• B)benefit the FI if the minimum amount is more than is warranted by actual withdrawal risk.
• C)lead to increased withdrawals by depositors that do not meet the minimum requirement.
• D)assist the FI manager by providing an optimal target amount of cash that will exactly match withdrawal expectations.
• E)None of these.

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