The prime interest rate Multiple Choice is lower than the federal funds rate because it is the rate charged to a bank's most creditworthy customers. is influenced by Fed policies that change the money supply.

Q: re are claims that the central bank caused the recession, and due to them, production has dropped…

A: Central bank are very important in the country and role of central banks have become major factor in…

Q: The Federal Reserve has the power to fix the min rate of interest that commercial banks may pay on…

A: Federal interest rate-Federal Reserve pays interest on bank's reserve balance, and it is a common…

Q: If reserves are scarce, how would the federal funds rate change (increase or decrease) if the Fed:…

A: Federal funds is referred as an excess reserves that are held by the financial institutions for over…

Q: Suppose that the Fed wants to lower long-term interest rates and buys all the Treasury securities…

A: If the Fed buys all the Treasury securities that banks hold, it will increase the assets on its…

Q: Gross interest expenses of banks are normally higher in periods when market interest rates are…

A: Gross interest expenses of banks are normally higher in periods when market interest rates are…

Q: 3. Consider the monetary neutrality. Suppose that the central bank changed the money supply.…

A: Money Neutrality is an economic theory which states that the change in the supply of money or stock…

Q: When interest rates fall, the rates that a bank pays on deposits typically decline less than the…

A: When interest rates fall, the rates that a bank pays on deposits typically decline less than the…

Q: The flow of funds through financial markets increases the volume of savings and investment by:…

A: Saving and investment are the key factor in any economic development. Person having sufficient money…

Q: Central Banks are in fact not at fault when it comes to turning economy into recession and…

A: Each country has its own central bank and a country’s central bank has the power to control that…

Q: A bank's net interest margin represents the proportion of its investments that are financed with…

A: The difference between interest paid and interest received, adjusted for the entire amount of…

Q: A bank has a positive repricing gap. This implies that a. some RSAs are financed by fixed-rate…

A: Banks face different types of risks and repricing risk is one of them. This risk pertains to the…

Q: part-a: What is the difference between direct finance and indirect finance?  part-b: What are the…

A: Since you have posted a question with multiple subparts, we will solve first three sub parts for…

Q: Using interbank borrowing and lending market, such as the federal funds market in the US, can help a…

A: The interbank rate is the rate at which the banks lend or borrow money from one another. The…

Q: What is float in the banking system? A. An illegal activity that is a form of bank fraud B.…

A: Float in banking system means that money is counted due to time difference between deposit made and…

Q: he purpose of the inflation premium is to maintain the purchasing power of money while it is loaned…

A: a) An inflation premium is added to interest rates for compensating for expected inflation by…

Q: Why are the banks reluctant to lend, and what should be done to increase bank lending?

A: Banks generally borrow and lend cash in the interbank loaning market so as to oversee the liquidity…

Q: Which one is not an incentive for a bank to securitize its mortgage loans? Reduce insurance premium…

A: The objective of the question is to identify which among the given options is not a reason for a…

Q: 1) Which of the following statements about the money markets are true? A) Most money market…

A: Money Market is the place where short terns securities are dealt in.

Q: If a bank has a positive repricing gap (RSAs > RSLs), then: Does this bank have reinvestment or…

A: The problem case focuses on identifying the impact of the positive repricing gap on the risk and…

Q: What is a common method used by banks to account for the interest income on loans that

A: The most common method used by banks to account for the interest income on loans that considers…

Q: Why would a bank sell a package (portion) of its loans? A) to decrease liquidity B) to increase the…

A: Securitization  is a process wherein individual loans, debts, etc., that involve a payment stream…

Q: what are the tools the Federal Reserve uses to control monetary policies.  Expand on how the Federal…

A: Monetary policy is the tools and technique which is used by the government in order to control the…

Q: Match the correct type of bank risk with the appropriate associated statement. 1.The possibility…

A: Risk is referred as the possibility of the something bad happened. It also involves in an…

Q: Common types of short-term finance inc paid taxes and trade credit. O accrued wages and floor-plan…

A: Short Term Finance:  Short term finance refers to the repayment period having less than a year.…

Q: Which of the following is NOT an advantage of depositing funds into a bank account (compared to…

A: Depositing funds with the banks is considered the safest investment and due to less risk it fetches…

Q: Banks use gap analysis to measure interest rate risk in their balance sheets. If firm XYZ is said to…

A: A positive gap is a situation where the bank’s rate-sensitive assets exceed the rate-sensitive…

Q: Why is credit risk management important and what are the features of a loan or debt instrument it…

A: Credit risk management is crucial because it enables financial institutions to recognise and control…

Q: In the federal funds markets, financial institutions can borrow money from the Federal Reserve.…

A: Financial instruments and products are various types of assets or contracts that can be bought or…

Q: What risks might commercial bank operations face by funding long-term loans such as mortgages to…

A: The banks and other financial institutions carry out Risk Management to mitigate the effect of…