Ho

w do large Dealer Banks $($or Investment Banks$)$ finance their very large portfolios of bonds worth hundreds of millions of dollars. Explain.

$($b $)$ In what circumstances would lenders to the Dealer Banks demand a higher $$haircut$($HC$)?$ Explain.

$($c $)$ What impact would an increase in the HC a Dealer Bank faces in obtaining funding have on the ability of a Dealer Bank to finance its bond holdings? What are two actions the Dealer Bank could take in response? Explain.