Asked by Christopher Flores on May 22, 2024
Verified
The interest rate charged by banks with excess reserves at a Federal Reserve Bank to banks needing overnight loans to meet reserve requirements is called the
A) prime rate.
B) discount rate.
C) federal funds rate.
D) call money rate.
E) money market rate.
Federal Funds Rate
The interest rate at which banks lend reserve balances to other depository institutions overnight, influenced by the Federal Reserve.
Reserve Requirements
Regulations set by central banks determining the minimum amount of reserves a bank must hold against deposits, a tool for monetary policy.
Overnight Loans
Short-term loans that banks borrow from each other to meet reserve requirements, which must be repaid within one business day.
- Comprehend key interest rates in the financial markets and their impact.
Verified Answer
VB
Victoria BarreraMay 22, 2024
Final Answer :
C
Explanation :
The federal funds rate is the interest rate at which depository institutions trade federal funds (balances held at Federal Reserve Banks) with each other overnight. This rate is crucial for maintaining reserve requirements.
Learning Objectives
- Comprehend key interest rates in the financial markets and their impact.