When one commercial bank borrows from another commercial bank,it pays the __________ rate.

Question

Quizplus · Accepted Answer

The federal funds rate is the interest rate at which depository institutions lend reserve balances to other banks overnight, typically for short-term liquidity needs. Therefore, when one commercial bank borrows from another commercial bank, it pays the federal funds rate. The discount rate is the interest rate at which banks can borrow directly from the Federal Reserve. The bank interest rate and prime rate are more commonly used for consumer loans and mortgages.

When One Commercial Bank Borrows from Another Commercial Bank,it Pays