Which of the following is true of the discount rate?
A)It is the interest rate commercial banks charge their most creditworthy customers.
B)It is the interest rate that thrift institutions charge for home mortgages.
C)It is the interest rate at which depository institutions can borrow from the Federal Reserve.
D)It is the interest rate set in the market for U.S.Treasury Bills.
E)It is the prime interest rate.

Question

Quizplus · Accepted Answer

The discount rate is set by the Federal Reserve and is the interest rate at which depository institutions (such as banks) can borrow funds from the Federal Reserve. It is also used as a tool for monetary policy, as changes to the discount rate can encourage or discourage borrowing and lending in the economy. Choices A, B, D, and E are not accurate descriptions of the discount rate.

Which of the Following Is True of the Discount Rate