The Concept of Constrained Optimization Facing an FI Manager Involving

question 102

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 reserves that will exactly match withdrawal expectations.

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Definitions:

Control Chart

A graphical tool used in process control to display how a process changes over time, helping to monitor its stability.

Defective

In quality control, defective refers to a product or outcome that fails to meet certain predefined standards or specifications.

Pooled Standard Deviation

An estimate of standard deviation across different samples combined, assuming equal or varying sample sizes but a common true variance.

Control Limits

Statistical boundaries set in quality control processes to identify when a process is out of control, based on specifications or historical performance data.