"Stored liquidity" management refers to:

Question

BlackTom AI · Accepted Answer

The question asks about the concept of 'stored liquidity' management and presents four options to evaluate.
Option A states: 'Holding excess reserves at the Federal Reserve.' While holding reserves is a form of liquidity, stored liquidity typically emphasizes holding liquid, marketable assets rather than just reserves, so this option does not fully capture the idea of stored liquidity as commonly defined.
Option B states: 'Maintaining a portfolio of highly liquid, marketable securities like Treasury bonds.' This aligns with the standard concept of stored liquidity, which involves readily saleable assets that can quickly meet cash needs without significant loss of value.
Option C states: 'Borrowing funds in the federal funds market or from the Fed discount window when needed.' This describes liquidity access or funding strategies, not the stored liquidity of a pre-positioned liquid asset portfolio.
Option D: 'Both A and B.' Since A is not a perfect fit for stored liquidity on its own, combining A with B would be inaccurate when describing stored liquidity management.
In summary, the best match to the idea of stored liquidity is Option B, because it highlights pre-positioned, highly liquid, marketable assets used to meet short-term liquidity needs, whereas the other options depict related but distinct concepts (reserves as a funding source, external borrowing, or an incorrect combination).

BU.231.710.51.FA25 The Final Exam

"Stored liquidity" management refers to:

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