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The discount rate is the interest rate that c. the fed charges banks for loans.
The term “discount rate” is used when looking at an amount of money to be acquired within the future and calculating its present cost. The word “bargain” way “to deduct an amount.” a discount rate is deducted from a future price of cash to provide its present price.
In corporate finance, a discount rate is a fee going back used to bargain destiny coins flow back to their gift value. This rate is often a company's Weighted common price of Capital (WACC), required rate of return, or the hurdle fee that investors anticipate to earn relative to the hazard of the funding.
An investor expects a $1,000 investment to provide a ten% go back in 12 months. in that case, the cut price for valuing this funding or comparing it to others is 10%. The discount rate allows buyers and others to recall hazards in funding and set a benchmark for future investments.
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The discount rate is the interest rate that the fed charges banks for loans. Therefore, option 'C' is the answer.
The interest rate the Federal Reserve (Fed) charges banks to borrow money from a Federal Reserve bank is known as the federal discount rate.
The Fed's board of governors determines the discount rate, which can be changed as a tool for monetary policy by going up or down.
One of the Fed's main tools for implementing monetary policy is lending at the discount rate, which is a part of its role as a lender of last resort.
As a last resort, borrowing from the central bank is used as an alternative to borrowing from other commercial banks.
The Fed funds rate, or interbank rate, is typically lower than the discount rate.
Hence, OPTION 'C' is the correct answer.
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