Answer to Question #243967 in Finance for muddygirl

Question

Compare and contrast the federal funds rate, the discount rate, and the prime rate

Answer 1

The prime rate is based on the federal funds overnight rate, and prime is the starting point for most other interest rates. The discount rate is the interest rate levied by the Federal Reserve Bank to commercial banks and other financial institutions for short-term loans. The prime rate is the rate of interest charged by commercial banks to their most creditworthy corporate clients.