The discount rate is

a. the interest rate the Fed charges banks.

b. one divided by the difference between one and the reserve ratio.

c. the interest rate banks receive on reserve deposits with the Fed.

d. the interest rate that banks charge on overnight loans to other banks.

Question

Samir Petty

Business

4 February, 01:28

The discount rate is

a. the interest rate the Fed charges banks.

b. one divided by the difference between one and the reserve ratio.

c. the interest rate banks receive on reserve deposits with the Fed.

d. the interest rate that banks charge on overnight loans to other banks.

+5

Answers (1)

Know the Answer?

Aubrie Swanson · Answer 1

a. the interest rate the Fed charges banks.

Explanation:

Discount rate -

It is the rate of interest which is charged to financial institutions like banks for the loan they take from the Federal Reserve Bank.

The commercial banks can freely borrow from the Federal reserve bank, without any collateral, but need to give a certain amount of interest which is fixed, called the discount rate.

Hence, the correct statement for discount rate is a. the interest rate the Fed charges banks.

The discount rate isa. the interest rate the Fed charges banks.b. one divided by the difference between one and the reserve ratio.c. the interest rate banks receive on reserve deposits with the Fed.d. the interest rate that banks charge on overnight loans to other banks.

The discount rate is

a. the interest rate the Fed charges banks.

b. one divided by the difference between one and the reserve ratio.

c. the interest rate banks receive on reserve deposits with the Fed.

d. the interest rate that banks charge on overnight loans to other banks.