Question: (a) With the market segmentation described above, explain why interest on reserves is not a floor on the federal funds rate. (b) If the repo

(a) With the market segmentation described above, explain why interest on reserves is not a floor on the federal funds rate.

(b) If the repo rate and the federal funds rates are below interest on reserves, explain why there is an arbitrage opportunity created for US branches of foreign banks.

(d) Explain the floor system currently being used by the FRS.

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