Final answer:
The largest asset of the Bank of Canada is Government of Canada securities, with bonds being a primary asset category for banks due to their low-risk nature and guaranteed future payments.
Step-by-step explanation:
The largest component of the assets of the Bank of Canada is Government of Canada securities. Banks, including the Bank of Canada, hold assets in various forms such as cash in vaults, reserves held at the central bank, loans made to customers, and bonds. These bonds, often issued by governments, are a principal asset category for banks. Government bonds are seen as low-risk investments because it's highly likely that the government will fulfill its bond obligations, despite offering a lower rate of interest. For a bank, bonds function similarly to loans, constituting an asset that ensures a future stream of payments.