The discount rate is the interest rate charged on a(n):
A) low-interest loan from the Federal Reserve to a bank.
B) loan from the Federal Reserve to a bank.
C) long-term loan from one bank to another.
D) overnight loan from one bank to another.

Question

Quizplus · Accepted Answer

The discount rate is the interest rate charged by the Federal Reserve to member banks when they borrow from the central bank through the discount window. It's usually higher than the federal funds rate, which is the interest rate charged on short-term loans between banks. Therefore, the discount rate is not charged on loans between banks (choices C and D) or low-interest loans (choice A).

The Discount Rate Is the Interest Rate Charged on A(n)