1. Bank of Canada expects economy to slow down in the iture. To prevent ination from falling, Bank wants to ease monetary conditions it lowers the operating band from 0.?5% 1.25% to 0.5% 1% a) identify the initial bank rate, deposit rate and target overnight interest rate: b) identify the new bank rate, deposit rate, and the overnight interest rate target: c) If during the course of the day overnight funds are trading above the target overnight rate, manager at the trading desk at BoC enters into (SPRAs or SEAS?) d) Show the effect of the repurchase transaction (as specied by you in c.) on Taocounts of the 30C and Primary Dealer. Assume the transaction is worth $200 million Bank of Canada Primary Dealers (LVTS participants) Assets Liabilities Assets Liabilities e) Assuming no other transaction occurs, what is the effect of the new settlement balances position going to be on the overnight interest rate towards the end of the day? 2) Assume the Settle Balances are in a surplus position at the end of the day. How does the Bank of Canada neutralizes them? Explain with the help of Taccounts below. Assume SB are in surplus of +$200 million Bank of Canada Primary Dealers (LVTS participants) Assets Liabilities Assets Liabilities