1. The book describes liquidity management as a knife-edge management problem, meaning institutions want neither too much liquidity nor too little. Discuss one reason on each side why does an institution not want too little liquidity, and why does an institution not want to much liquidity?

2. In previous generations, liquidity crises such as bank runs were much more common than they are today. Give two reasons why bank runs are no longer as common as they used to be.

3. Choose three of the six CAMELS components, and explain how loan sales can help mitigate risk or otherwise provide a benefit in that area. (The component areas are Capital Adequacy, Asset Quality, Management, Earnings, Liquidity, and Sensitivity. You only need to choose three to discuss.)