Question 4 (20 marks) (a) Explain purchased liquidity approach in liquidity management and point out 2 advantages of that approach. (6 marks) (b) Explain stored liquidity approach in liquidity management and point out 2 advantages of that approach. (6 marks) (c) An FI has 2 kinds of assets: 60% in 1 month T-bill and 40% in 1 month consumer loan. In a month, the T-bill will yield $100, but now it worths only $97. The consumer loan will yield $88 in a month, but now it is worth $76. Calculate the 1 month liquidity index. (3 marks) (d) Refer to (c), if the market conditions change suddenly and the T-bill now worths $98, while the consumer loan worths $72. Calculate the new 1 month liquidity index. (3 marks) (e) Based on the results from (c) and (d), interpret the liquidity risk faced by the FI before and after the market conditions change. (2 marks)