Question

Projecting that it might temporarily fall short of legally required reserves in the coming days, the Bank of Beano decides to borrow money from its regional Federal Reserve Bank. The interest rate on the loan is called the _____?

Answer 1

Answer:

Discount rate is the correct answer.

Explanation:

There are two different definitions of the discount rate. It refers to the commercial banks and other institutions for the loan which they have taken from the federal reserve bank via the discount window loan process. The interest rate which is used in the discounted cash flow analysis for determining the present value of future cash flows is the other definition of the discount rate.