Bank of canada believes canadian economy

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Assume the Bank of Canada believes the Canadian economy is growing too quickly. Inflation is beginning to rise close to the top end of the Bank of Canada target range. Currently, the Bank has a target overnight rate of 2.0%. Therefore, the Bank Rate is 2.25%. But the overnight market is trading very close to the bottom of the operating band, near 1.75%. The Bank of Canada steps in and signals to the market that it believes economic growth needs to slow to ensure that inflation remains stable. So, the Bank of Canada raises its overnight target from 2.0% to 2.25% Vitaly is the owner of a successful manufacturing business with a $1 Million line-of-credit at CIBC. He is charged the Prime Rate + 1% on all outstanding balances. If the Prime Rate is currently 0.75% above the Bank Rate, what rate of interest is CIBC charging Vitaly on his business line-of-credit?

Reference no: EM133629799

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