On Fedwire, daylight overdraft
A)is a bank's positive intraday balance in its reserve account at the Fed.
B)does not occur under the current payments system.
C)invites a fee is 50 basis points, quoted as an annual rate on the basis of a 24-hour day.
D)has a seasonal component.
E)is not a potential source of instability in the financial markets.

Question

Quizplus · Accepted Answer

Daylight overdraft on Fedwire can occur when a bank's payment obligations exceed its available balance in its Reserve account with the Fed during the day. The Fed charges a fee for daylight overdrafts at a rate of 50 basis points annually based on a 24-hour day. Therefore, option C is the correct answer.

On Fedwire, Daylight Overdraft