SIE Exam Question 393: Answer and Explanation

Question: 393

When a commercial bank elects to borrow short-term, often overnight, loans from another commercial bank, these loans are done at an interest rate known as the:

• A. discount rate
• B. prime rate
• C. fed funds rate
• D. call loan rate

Correct Answer: C

Explanation:

C: The federal funds rate of interest is the interbank overnight loan rate.