California Real Estate Practice Exam

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What is the interest rate charged by the Federal Reserve System to borrow money known as?

  1. Prime rate

  2. Mortgage rate

  3. Interest rate

  4. Discount rate

The correct answer is: Discount rate

The interest rate charged by the Federal Reserve System to borrow money is known as the Discount Rate. The Discount Rate is set by the Federal Reserve and is typically lower than the Prime Rate, which is the rate banks charge their most creditworthy customers. The Mortgage Rate is the rate at which banks lend money for mortgages, and the Interest Rate is a general term that can refer to any rate charged on a loan. Therefore, the Discount Rate is the most specific and accurate term for the interest rate charged by the Federal Reserve.

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