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1. Describe how bankers manage credit risk and interest rate risk. 2. Explain why regulators mandate minimum reserve and capital ratios. 3. Discuss the opportunity

1. Describe how bankers manage credit risk and interest rate risk. 2. Explain why regulators mandate minimum reserve and capital ratios. 3. Discuss the opportunity cost to holding reserves, which pay no interest, and capital, which must share the profits of the business.

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