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Explain the difference between the primary and secondary sources of repayment, and list examples of each....

Explain the difference between the primary and secondary sources of repayment, and list examples of each. In particular, explain why it may be difficult to depend on liquidating collateral to recover a loan.

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Answer #1

Banks primarily rely on two sources of repayment

Primary source. Primary source is the cash flows itself

Secondary sources. Secondary sources is collteral or guarantee

Resons for difficulties

Because liquidating collateral involves multiple factors like marketability. It's value . Liquidity which may prove to be risky

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