The Interest Rate That Banks Use as a Reference Point

question 143

Multiple Choice

The interest rate that banks use as a reference point for interest rates on a wide range of loans to businesses and individuals is the:

• A) Discount rate
• B) Term auction rate
• C) Prime interest rate
• D) Real interest rate

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Definitions:

Gross Sales

represent the total sales revenue before any deductions are made for returns, allowances, or discounts.

Cash Sales

Transactions in which goods or services are exchanged immediately for cash payment.

Credit Sales

Sales made on credit, allowing buyers to pay at a later date, usually generating accounts receivable for the seller.

Discount Period

The time frame between the date of the sale and the due date when a discount is available for payment of an invoice.