The Bank of Canada's overnight rate target corresponds closely to the
A) bank rate.
B) prime business rate.
C) federal funds rate in the U.S.
D) market rate.
E) T-bill ratE.

Question

Quizplus · Accepted Answer

The Bank of Canada's overnight rate target corresponds closely to the federal funds rate in the U.S. These rates are both overnight lending rates between banks, and changes in one rate often lead to changes in the other. The bank rate (A) is set by the Bank of Canada independently of market forces and is typically higher than the overnight rate target. The prime business rate (B) is the interest rate that banks charge their most creditworthy customers, and is usually set a few percentage points above the overnight rate target. The market rate (D) is the prevailing interest rate in the open market, and can be influenced by a variety of factors including inflation, economic growth, and supply and demand for credit. The T-bill rate (E) is the interest rate earned by investors on short-term U.S. government debt and is not directly related to the Bank of Canada's overnight rate target.

The Bank of Canada's Overnight Rate Target Corresponds Closely to the