BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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a private borrower would pay a bank for a loan.
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one bank would pay another bank for a loan.
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a bank would pay the Federal Reserve for a loan.
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the Federal Reserve would pay to borrow money from government.
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Detailed explanation-1: -The federal funds rate is the target interest rate set by the FOMC. This is the rate at which commercial banks borrow and lend their excess reserves to each other overnight. The FOMC sets a target federal funds rate eight times a year, based on prevailing economic conditions.
Detailed explanation-2: -The Federal Open Markets Committee (FOMC) sets the federal funds rate-also known as the federal funds target rate or the fed funds rate-to guide overnight lending among U.S. banks. It’s set as a range between an upper and lower limit. The federal funds rate is currently 4.50% to 4.75%.
Detailed explanation-3: -The fed funds rate is the interest rate that depository institutions-banks, savings and loans, and credit unions-charge each other for overnight loans. The discount rate is the interest rate that Federal Reserve Banks charge when they make collateralized loans-usually overnight-to depository institutions.
Detailed explanation-4: -The federal discount rate is the interest rate the Federal Reserve (Fed) charges banks to borrow funds from a Federal Reserve bank. The Fed discount rate is set by the Fed’s board of governors, and can be adjusted up or down as a tool of monetary policy.