The interest rate that banks charge one another for overnight borrowing is known as the:
Select one:
a. LIBOR rate
b. federal discount rate
c. federal funds rate
d. prime rate
e. T-Bill + 6% floating rate
The rate at which one bank borrows money from other Bank at overnight borrowing method is known as the Federal Funds Rate
Therefore (c) is the answer to this question
Prime rate is the rate at which banks lend to the customers at credit
Therefore (d) is wrong
T Bill + 6% floating rate is concerned with the treasury bills issued by the treasury but not banks
Therefore (e) is wrong
the federal discount rate is nothing but the Federal Reserve charges the banks for borrowing the reserves
Therefore (b) is wrong
LIBIR rate is the interest rate is estimated by the leading banks of London on the whole and that is the reason why
(a) is the answer to this question
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