Series 7: 9.1.2.4. Order Of Interest Rates

9.1.2.4. Order of Interest Rates

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

Recall that 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 (which are discussed further later in this chapter). The discount rate is the rate the Fed charges banks to borrow funds from them.