The interest rate on primary credit extended by the Fed is:

Question

Quizplus · Accepted Answer

The interest rate on primary credit extended by the Fed is set at 100 basis points (1%) above the target federal funds rate. This rate serves as a benchmark for other short-term interest rates, including the prime rate, which is charged by commercial banks to their creditworthy customers. Therefore, the option A is not correct since it's not necessarily the average of prime interest rate charged by the ten largest banks in the nation. The option B is also incorrect because it suggests primary credit is lower than the target federal funds rate whereas primary credit is always higher as per Fed's policy. The option C is incorrect because it exaggerates the difference between the primary credit and target federal funds rate.

The Interest Rate on Primary Credit Extended by the Fed