SIE Exam Question 1025: Answer and Explanation

Question: 1025

____ The interest rate at which depository institutions (banks and credit unions) lend reserve balances to other depository institutions overnight, on a collateralized basis.

• A. Call loan rate
• B. Discount rate
• C. Fed funds rate
• D. LIBOR

Correct Answer: C

Explanation:

The Fed funds rate is the interest rate at which depository institutions (banks and credit unions) lend reserve balances to other depository institutions overnight, on a collateralized basis.