The interest rate banks charge brokerage firms for margin purchases is the _________ rate.

Question

Quizplus · Accepted Answer

The interest rate banks charge brokerage firms for margin purchases is known as the call money rate. This is the rate at which banks lend money to broker-dealers who then lend that money to investors for margin trades. Option B) overnight rate refers to the interest rate banks charge other banks for overnight loans. Option C) discount rate refers to the interest rate at which the Federal Reserve lends money to banks. Option D) prime rate refers to the interest rate commercial banks charge their most creditworthy customers. Option E) LIBOR (London Interbank Offered Rate) is an average interest rate estimated by leading banks in London that they would be charged if borrowing from other banks.

The Interest Rate Banks Charge Brokerage Firms for Margin Purchases