Series 65: 1.1.2.4. Order Of Interest Rates

1.1.2.4. Order of Interest Rates

The exam may ask you to put the four important types of interest rates reported in the media in order from highest to lowest, or vice versa.

The federal funds rate is the rate at which banks borrow overnight funds from each other. This is the rate that the Federal Reserve alters through open market operations.

The discount rate is the rate the Fed charges banks to borrow funds.

The broker call rate is the interest rate that bankers charge broker-dealers to meet their customers’ margin requirements. The broker call rate is typically lower than the prime rate, but not as low as the discount or the federal funds rates. The margin rate that the broker charges the customer is typically the broker