Which of the Following Is Correct Regarding the Discount Rate

question 24

Multiple Choice

Which of the following is correct regarding the discount rate and the federal funds rate?

• A) The discount rate is a market equilibrium rate, and the federal funds rate is fixed and unchanging.
• B) The discount rate is a reduction in interest rates that is available to preferred bank borrowers, and the federal funds rate is the rate that the national government pays to borrow from the central bank.
• C) The discount rate is the interest rate that banks pay to borrow from the central bank, and the federal funds rate is the rate that banks pay to borrow one another's excess reserves.
• D) The discount rate is the interest rate that banks pay to borrow from each other, and the federal funds rate is the rate that they pay to borrow from the central bank.

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Definitions:

Mortgage Payable

A liability account on a company's balance sheet that represents funds borrowed, secured by property, to be paid back with interest.

Balance Sheet

An economic report that presents the value of a corporation’s assets, liabilities, and equity held by shareholders on a given date.

Periodic Inventory Method

An inventory accounting system where updates to the inventory accounts are made on a periodic basis, typically at the end of an accounting period.

Financial Statement(s)

Reports that summarize the financial performance and position of a business or entity.