When U.S.banks borrow from one another,they must pay the
A)discount rate.
B)prime rate.
C)Fed funds rate.
D)Interbank Offer Rate.

Question

Quizplus · Accepted Answer

When U.S. banks borrow from one another, they borrow through the Federal Funds Market and the interest rate charged on these short-term loans is called the Fed funds rate. Therefore, option C is the correct answer.

The discount rate (option A) is the interest rate at which banks can borrow from the Federal Reserve, while the prime rate (option B) is the interest rate that banks charge their most creditworthy customers. The Interbank Offer Rate (IBOR) (option D) is a term used to describe different reference rates used by banks in the interbank market. While it is related to the Fed funds rate, it is not the rate used when U.S. banks borrow from one another.

When USBanks Borrow from One Another,they Must Pay the