1. For example, the customer might be a municipality with tax receipts that it has just collected and no immediate need to disburse the funds.

2. We are assuming in this illustration that the borrower will provide collateral that is equal in value to the money that is loaned. In practice, lenders require borrowers to provide collateral in excess of the value of money that is loaned. We will illustrate how this is accomplished shortly when we discuss repo margins.

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