Question

The discount rate is the rate that a. banks charge for loans to corporate customers. b. banks charge to lend foreign exchange to customers. c. banks charge each other on loans of excess reserves. d. banks charge securities dealers to finance their inventory. e. the Federal Reserve charges on loans to commercial banks.

Answer 1

The correct answer is e. the Federal Reserve charges on loans to commercial banks.

Step-by-step explanation:

The discount rate is the the minimum interest rate set by the US Federal Reserve (and some other national banks) for lending to other banks. This rate is also used in discounted cash flow (DCF) analysis to determine the present value of future cash flows.

A discount rate is a measure of interest on certain investments.