Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please help with the following a. The overnight lending rate is O the interest rate the banks charge one another on overnight loans, whereas the

Please help with the following

image text in transcribed
a. The overnight lending rate is O the interest rate the banks charge one another on overnight loans, whereas the prime interest rate is the interest rate banks change on loans to their most creditworthy customers. 0 the interest rate the banks charge on loans to their most creditworthy customers, whereas the prime interest rate is the interest rate banks charge their largest and most preferred business customers. 0 the interest rate the banks charge on loans to their most creditworthy customers, whereas the prime interest rate is the interest rate banks charge one another on overnight loans. 0 the interest rate the Bank of Canada charges banks for a loan, whereas the prime interest rate is the interest rate banks charge their preferred customers. b. The overnight lending rate is 0 lower than the prime interest rate because federal funds are loaned overnight. 0 higher than the prime interest rate because there are many alternative uses for the funds and opportunity costs must be accounted for. O nearly the same as the prime interest rate because they are both short term loans. 0 not comparable to the prime interest rate since the lenders are different. c. Changes in the overnight lending rate and the prime interest rate closely track one another because 0 there are fewer prime rate reserves available for lending. 0 both rates are related to the relative scarcity or availability of reserves. 0 all interest rates will be equal whether the customers are banks, businesses, or households. 0 the Bank of Canada arranges this to be the case

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Consumer Behaviour

Authors: Evans, Martin Evans

2nd Edition

0470994657, 9780470994658

More Books

Students also viewed these Economics questions

Question

Pollution

Answered: 1 week ago

Question

The fear of making a fool of oneself

Answered: 1 week ago