The interest rate that banks charge one another on overnight loans is called the
A) discount rate.
B) prime lending rate.
C) overnight lending rate.
D) federal funds rate.

Question

Quizplus · Accepted Answer

The federal funds rate is the interest rate that banks charge one another on overnight loans of their Federal Reserve deposits. The other options are not correct as the discount rate is the interest rate at which banks can borrow from the Federal Reserve, the prime lending rate is the interest rate that commercial banks charge their most creditworthy customers, and the overnight lending rate is a broad term for overnight borrowing and lending activities between financial institutions.

The Interest Rate That Banks Charge One Another on Overnight