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How Can a Depository Intermediary Afford to Purchase Long-Term Risky

question 6

Essay

How can a depository intermediary afford to purchase long-term risky direct claims from funds demanders and finance these purchases with safe,liquid,short-term,low-denomination deposits? What can go wrong in this process?

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Definitions:

Incentives

Rewards or benefits, often linked to performance, that motivate individuals to act in certain ways.

Downsizing

The elimination of a significant number of employees from an organization.

Staffing

The hiring of people to carry out the work of the organization.

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