n 20 of 26 Sapling Learning The Bank of Key West is not going to have enough res
ID: 1118752 • Letter: N
Question
n 20 of 26 Sapling Learning The Bank of Key West is not going to have enough reserves at the end of the business day to meet its reserve req rement of 10%. It currently has two options to borrow money ovem ghtn order to meet the Reserve at a rate of 1.55% Second, it could it could borrOW money from the Federal borrow money from other banks at a rate of 0.15%. Using this information answer the following questions. 1. What is the federal funds rate? Number 2. What is the discount rate? Number 3. What would happen to other short-term interest rates if the Fed increases its federal funds rate targe? O They would decrease O They would become irrelevant O They would also increase. O They should remain unchanged. O Previous Check Answer Next Ext Hint MacBook Air F3 F4 FS F6 F7 F8Explanation / Answer
1> 1.55%
the federal funds rate is the interest rate at which depository institutions lend reserve balances to other depository institutions overnight, on an uncollateralized basis.
2>0.15%
The discount rate is the interest rate charged to commercial banks and other depository institutions for loans received from the Federal Reserve's discount window.
c>They would also increase
Reason
If the fed fund rate rises, the interest rate rises as borrowing will be charged higher by the banks.
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