The discount rate is the interest rate

Question

Quizplus · Accepted Answer

The discount rate is the interest rate that the Federal Reserve charges banks when they borrow reserves overnight. This helps to regulate the money supply and influence short-term interest rates. Option A is incorrect because CDs are a type of investment for customers, not a source of funding for banks. Option B is incorrect because the Fed pays interest on reserves held by banks, but this is not the same as the discount rate. Option D is incorrect because banks charge different interest rates to their customers based on various factors such as creditworthiness, loan duration, and market conditions. Option E is incorrect because short-term Treasury securities have their own yield and are not directly tied to the discount rate.

The Discount Rate Is the Interest Rate