A) Assume the overnight funds are trading below the target level. What can Bank of Canada do in terms of

repurchase transactions to retore the interest rate target? Explain with the help of a diagram for the market

for reserves.

B)Assume the repurchase transaction suggested in part a. is worth $ 50 M, show the effect of this transaction

on the t-accounts of Bank of Canada and the Direct Clearer.

C.)Briefly explain how Bank of Canada would neutralize the effect on Settlement Balances the same day that

were changed due to the repurchase transaction in part a.