The Federal Reserve announced that it would lower the discount rate from 4.75% to 4.5%. This represents a decrease of
A)25 basis points
B)250 basis points
C)2.5 basis points
D)0.25 basis points

Question

Quizplus · Accepted Answer

The discount rate is typically expressed in terms of basis points, which is 1/100th of a percentage point. Therefore, a decrease from 4.75% to 4.5% represents a decrease of 25 basis points. B) 250 basis points would be a significant decrease and not accurate for this scenario. C) 2.5 basis points and D) 0.25 basis points would both represent insignificant changes to the discount rate. The discount rate decreased by 25 basis points, which is equivalent to 0.25%. Therefore, the correct answer is A.

The Federal Reserve Announced That It Would Lower the Discount