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The prime rate: is the annual rate of interest for banks' best customers. changes infrequently. is...

The prime rate:

  • is the annual rate of interest for banks' best customers.

  • changes infrequently.

  • is usually lower than treasury bill rates.

  • is the annual rate of interest for the bank.

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Answer #1

Option A is correct

The prime rate is the annual rate of interest for banks' best customers. The best customers are defined in terms of their creditworthiness. Only the creditworthy customers of the bank can borrow at the prime rate.

Option B is incorrect because the prime rate remains constant for a longer period of time

Option C is incorrect because the prime rate is higher than the treasury bill rate

Option D is incorrect because the annual rate of interest for the bank is not equal to the prime rate, it is usually higher

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