Rolliand Bank is going through a financial crisis. Therefore, it takes a loan from the Federal Reserve. The bank has to repay the loan within a year, and it also has to pay a monthly interest of 6% to the Fed. In this case, the 6% interest rate that the Fed charges from Rolliand Bank is the _____.
A) prime rate
B) nominal rate
C) discount rate
D) exchange rate

Question

Quizplus · Accepted Answer

The discount rate is the interest rate charged by a central bank to commercial banks and other financial institutions for loans. In this case, the Fed is charging Rolliand Bank a 6% discount rate on the loan.

Rolliand Bank Is Going Through a Financial Crisis