1. What are the benefits and costs of an FI of holding large amounts of liquid assets? Why are Treasury securities considered good examples of liquid assets?

2. How are an FIs liability and liquidity risk management problem related to the maturity of its assets relative to its liabilities?

3. What concerns motivate regulators to require DIs to hold minimum amounts of liquid assets?

4. How do liquid asset reserve requirements enhance the implementation of monetary policy? How are reserve requirements a tax on DIs?

5. Rank these financial assets according to their liquidity: cash, corporate bonds, NYSE-traded stocks, and T-bills.

6. Define the reserve computation period, the reserve maintenance period, and the lagged reserve accounting system.