The prime rate has been tied to market interest rates to better relate the interest rate to banks' cost of funds.

Question

Quizplus · Accepted Answer

The prime rate is typically based on the federal funds rate, which is influenced by market interest rates, as well as banks' cost of funds. This helps to ensure that the prime rate accurately reflects the overall interest rate environment and the costs banks face in obtaining funds.

The Prime Rate Has Been Tied to Market Interest Rates