What is one characteristic of a target balance in a sweep structure?

In a sweep structure, the target balance is a predetermined amount of funds that an organization aims to maintain in its swept account. This characteristic is crucial because it allows the organization to effectively manage its liquidity by automatically transferring excess funds to an investment account or other accounts while ensuring that the swept account always has enough liquidity to meet operational needs.

By maintaining a specific amount, the organization can ensure it has sufficient funds available for daily transactions and payments, while any excess funds can be utilized elsewhere to potentially earn interest or provide a return on investment. This automated movement of funds is central to the efficiency of the sweep structure, reducing manual intervention and associated risks.

The other choices do not accurately reflect how a target balance functions within a sweep structure. The target balance is not required to be zero at all times, nor are funds completely restricted from access; in fact, parts of the funds in the swept account can be accessed to cover transactions. Also, the target balance is intended to control the minimum amount maintained in the account rather than allow for unlimited transactions, which could lead to liquidity challenges.