ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The discount rate is the interest 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.

Detailed explanation-2: -The discount rate is the interest rate the Fed charges on loans of reserves to banks. The federal funds rate is the interest rate banks charge for overnight loans of reserves to other banks.

Detailed explanation-3: -The federal funds rate, or fed funds rate, is set by the Federal Open Market Committee (FOMC) of the Federal Reserve. It can be defined as the interest rate charged to various lending institutions such as banks on unsecured loans that are borrowed overnight.

Detailed explanation-4: -Basic Info. US Discount Rate is at 4.75%, compared to 4.75% the previous market day and 0.25% last year. This is higher than the long term average of 1.94%.

Detailed explanation-5: -A discount rate is an interest rate. The term “interest rate” is used when referring to a present value of money and its future growth. The term “discount rate” is used when looking at an amount of money to be received in the future and calculating its present value.