tion 10 of 22 Sapling Learning The Bank of Key West is not g

tion 10 of 22 Sapling Learning The Bank of Key West is not going to have enough reserves at the end of the business day to meet its reserve requirement of 10%, currently has two options to borrow money overnight in order to meet the requirement. First, it could borrow money from theFederal Reserve at a rate of 0.95% Second, it could borrow money from other banks at a rate of 0.15%. Using this information answer the following questions. 1. What is the federal funds rate? Number 2. What is the discount rate? Number 3. What would happen to other short-term interest rates if the Fed increases its federal funds rate target? O O They would also increase. They would decrease. They should remain unchanged. They would become irrelevant. O O Previous Gwe Up & View Solulcr, 9 Check Answer Hint Next E about us careersprivecy policyterms of upecontact u

Solution

Federal funds rate is money lent on rate for overnight basis through other banks or credit unions hence in this case Federal fund rate is 0.15%

Money lent on overnight basis through federal reserve is called discount rate hence the answer is 0.95%

Answer for 3)

Increase in federal rate increases the borrowing cost hence lowers the demand for money which increases short term interest rate

Option A is Correct