a$)$

Describe the greatest cause of liquidity exposure faced by

i$.$ Life insurance companies. $(4$ marks$)$

ii$.$ Property and casualty insurance companies

Bright Street Bank has the following balance sheet $($in millions$)$:

$(4$ marks$)$

ASSETS

LIABILITIES AND EQUITY

Deposits $ $120\mathrm{.}0$

Borrowed Funds $50\mathrm{.}0$

Equity

$20\mathrm{.}0$

$$190\mathrm{.}0$

Cash

Loans

Securities

$ $30\mathrm{.}0$

$110\mathrm{.}0$

$50\mathrm{.}0$

$$190\mathrm{.}0$

b$)$ One of Bright Street Bank's commercial customers decides to exercise a $$15$ million loan

commitment. Show how the new balance sheet will appear if the bank uses the

following liquidity management risk strategies.

i$.$ Purchased liquidity management. $(4$ marks$)$

ii$.$ Stored liquidity management. $(4$ marks$)$

c$)$ Describe two $(2)$ metihods to: measure liquidity risk. $(4$ marks$)$