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) the liquidity requirement in a money market
D) the demand in a bond market

Question

Quizplus · Accepted Answer

The prime rate of interest is influenced by the changing supply-and-demand relationship for short-term funds. It is the rate at which banks lend money to their most creditworthy customers, which typically includes other banks and large corporations. As such, changes in the supply and demand of short-term funds can affect the interest rate that banks charge for loans, which in turn affects the prime rate.

The Prime Rate of Interest Fluctuates with ________