The risk-free rate on borrowed funds is determined by
A) the Federal Reserve.
B) Congress.
C) supply and demand.
D) the banking system.

Question

Quizplus · Accepted Answer

The risk-free rate on borrowed funds is primarily determined by the forces of supply and demand in the market, not by a single entity or institution. This rate reflects the return on the safest investments, typically government securities, and varies based on the overall demand for these safe assets compared to their supply.

The Risk-Free Rate on Borrowed Funds Is Determined by