If the operating band for the overnight interest rate is from 3.5 to 4.0 percent, then ________.
A) the rate on positive settlement balances at the Bank of Canada is 3.5 percent
B) the rate on positive settlement balances at the Bank of Canada is the lower limit of the operating band
C) the bank rate is the lower limit of the operating band
D) A and B only.

Question

Quizplus · Accepted Answer

Option A is correct because the interest rate for positive settlement balances at the Bank of Canada is generally set at the lower limit of the operating band. 
Option B is also correct because, as mentioned, the Bank of Canada normally sets the interest rate for positive settlement balances at the lower limit of the operating band. 
Option C is incorrect because the bank rate is a different interest rate used as a benchmark for lending rates between banks and is not directly related to the overnight interest rate or the operating band.

If the Operating Band for the Overnight Interest Rate Is