The prime rate of interest fluctuates with
A) the changing supply and demand relationship for long-term funds.
B) the changing supply and demand relationship for short-term funds.
C) demand in the bond market.
D) the risk of the firm borrowing the funds.

Question

Quizplus · Accepted Answer

The prime rate of interest is the interest rate that banks charge their most creditworthy customers for short-term loans. As a result, it fluctuates with the changing supply and demand relationship for short-term funds, making choice B the correct answer.

The Prime Rate of Interest Fluctuates with