Question 5 (15 marks). (a) Explain purchased liquidity approach in liquidity management and point out TWO advantages of that approach. (5 marks) (b) Explain stored liquidity approach in liquidity management and point out TWO advantages of that approach. (5 marks) (c) An financial institution has 2 kinds of assets: 50% in T-bill and 50% in consumer loan. If the assets in the portfolio need to be liquidated at short notice, the T-bill is sold at $97 even though its fair value is $98. The consumer loan is sold at $76 even though its fair value is $90. Calculate the liquidity index. (2 marks) (d) Refer to (c), if the market conditions change suddenly and the T-bill and consumer loan are sold at $93 and $89 respectively at short notice. Calculate the new liquidity index. (2 marks) (e) Based on the results from (C) and (d), interpret the liquidity risk faced by the financial institution before and after the market conditions change. (1 marks) Question 5 (15 marks). (a) Explain purchased liquidity approach in liquidity management and point out TWO advantages of that approach. (5 marks) (b) Explain stored liquidity approach in liquidity management and point out TWO advantages of that approach. (5 marks) (c) An financial institution has 2 kinds of assets: 50% in T-bill and 50% in consumer loan. If the assets in the portfolio need to be liquidated at short notice, the T-bill is sold at $97 even though its fair value is $98. The consumer loan is sold at $76 even though its fair value is $90. Calculate the liquidity index. (2 marks) (d) Refer to (c), if the market conditions change suddenly and the T-bill and consumer loan are sold at $93 and $89 respectively at short notice. Calculate the new liquidity index. (2 marks) (e) Based on the results from (C) and (d), interpret the liquidity risk faced by the financial institution before and after the market conditions change. (1 marks)