SIE Exam Question 315: Answer and Explanation

Question: 315

Which of the following interest rates is established by the Federal Reserve Board?

• A. Money Market rate
• B. Discount rate
• C. Prime rate
• D. Fed Funds rate

Correct Answer: B

Explanation:

B - The discount rate is set by the Fed, and is the rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank's lending facility--the discount window. The Fed influences the Fed Funds Rate, but does not actually set the rate - it is set by the market. The prime rate is set by banks.