The federal funds rate is

A. the interest rate the Fed charges commercial banks.

B. the interest rate on a Treasury Bill.

C. the interest rate a bank charges its best customers.

D. the interest rate banks charge each other for overnight loans.

D. the interest rate banks charge each other for overnight loans.

Explanation:

The Federal reserve requires banks to maintain a certain minimum amount on their local Federal bank account or in their vaults each night. The remaining amount can be lent out to the public or to other commercial banks. However, if a bank is running short of funds at the end of the day, they can borrow from another bank at the overnight federal fund rate before the business opens the next day.