Question 5

1. Describe the greatest cause of liquidity exposure faced by:

1. Life Insurance Companies.
2. Property and Casualty Insurance Companies.

2. Bright Street Bank has the following balance sheet (In millions)

Assets	Amount	Liabilities & Equity	Amount
Cash	30	Deposits	120
Loans	110	Borrowed Funds	50
Securities	50	Equity	20
Total	190	Total	190

One of Bright Street Banks commercial customer decided 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:

1. Purchased Liquidity Management
2. Stored Liquidity Management

1. Describe two (2) methods to measure liquidity risk.