When banks borrow through the Term Auction Facility, the price of borrowing is determined by:
A) the Federal Reserve.
B) a competitive bidding process.
C) the difference between the discount rate and the interest rate on three-month Treasury securities.
D) open-market operations.

Question

Quizplus · Accepted Answer

The Term Auction Facility involves a competitive bidding process in which banks bid for funds and the interest rate at which they are willing to borrow. The rate is then determined by the lowest accepted bid.

When Banks Borrow Through the Term Auction Facility, the Price