Question: Answer ONE question and NO MORE THAN TWO further questions from this section. (a) Distinguish between liquidity and solvency in relation to a bank. Explain

Answer ONE question and NO MORE THAN TWO further questions from this section. (a) Distinguish between liquidity and solvency in relation to a bank. Explain how a bank could become insolvent and explain the role of capital and liquidity in preventing insolvency. (12 marks) (b) Explain market risk and how it affects banks and critically evaluate how banks manage this risk. (13 marks)

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