If a commercial bank borrows from the Federal Reserve, the price it pays is
A) zero, there is no payment.
B) the prime rate.
C) the federal funds rate.
D) the discount rate.

Question

Quizplus · Accepted Answer

When a commercial bank borrows from the Federal Reserve, it pays the discount rate, which is the interest rate charged by the Federal Reserve Banks for loans to depository institutions. Therefore, the correct choice is D - the discount rate.

If a Commercial Bank Borrows from the Federal Reserve, the Price