Suppose the bank rate is equal to 3

Economics Dec 17, 2020

Suppose the bank rate is equal to 3.1%. a. What is the interest rate paid by the Bank of Canada on deposits? Express your answer in percentage b. What is the interest rate paid by commercial banks when they borrow from the Bank of Canada? Express your answer in percentage c. What is the operating band? Express your answer in percentage

Expert Solution

A. Interest rate paid by Bank of Canada is = 3.1 - 0.5 => 2.6% as this rate of 0.5% less than what Bank of Canada charges to banks for lending.

B. Interest rate paid by banks is 3.1% when they borrow from Bank of Canada.

C. Operating band = 2.6% - 3.1%

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