The Discount Rate Is the Interest Rate Charged By

question 88

Multiple Choice

The discount rate is the interest rate charged by:

• A) major banks to their best customers.
• B) banks for overnight loans to other banks.
• C) the Fed on loans of reserves to banks.
• D) banks for loans of less than 24 hours.

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Definitions:

Short Run

A period in which at least one factor of production is considered fixed, typically affecting decisions in economics and business.

Internal Growth Rate

The maximum rate at which a company can expand using only internal financing sources, without external financing.

Dividend Payout Ratio

The fraction of net earnings a firm pays to its shareholders as dividends, expressed as a percentage of the company's total earnings.

Retention Ratio

The proportion of net income that is retained by a company rather than distributed to its shareholders as dividends, indicating how much profit is reinvested.