First Bank needs to borrow money overnight from the Federal Reserve in order to meet its reserve requirements.Which one of the following interest rates will be charged on this loan?

Question

Quizplus · Accepted Answer

The interest rate that will be charged on the loan from the Federal Reserve is the discount rate. The discount rate is the interest rate at which banks can borrow from the Federal Reserve directly, and it is typically higher than other interest rates such as the federal funds rate or the money market rate.

First Bank Needs to Borrow Money Overnight from the Federal