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Finra SIE Exam - Topic 2 Question 22 Discussion

Which of the following rates is the interest rate at which banks borrow and lend to each other on an overnight basis?
C) Federal funds rate
A) Prime rate
B) Discount rate
D) LIBOR

Finra SIE Exam - Topic 2 Question 22 Discussion

Actual exam question for Finra's SIE exam
Question #: 22
Topic #: 2
[All SIE Questions]

Which of the following rates is the interest rate at which banks borrow and lend to each other on an overnight basis?

Show Suggested Answer Hide Answer
Suggested Answer: C

Step by Step

Federal Funds Rate: The rate at which depository institutions lend reserves to each other overnight. It is set by the Federal Open Market Committee (FOMC).

Other Rates:

Prime Rate: Rate banks charge their most creditworthy customers.

Discount Rate: Rate the Federal Reserve charges banks for borrowing directly from it.

LIBOR: Interbank lending rate used internationally, now being phased out.

Federal Reserve Explanation of Rates: Federal Funds Rate.


by Trevor at Apr 10, 2026, 01:46 AM

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Edelmira
2 days ago
C makes sense. It's crucial for banks' liquidity.
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Charlene
7 days ago
I remember learning about this. C is the answer!
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Vinnie
12 days ago
Definitely C. The prime rate is different.
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Xuan
17 days ago
I was torn between C and A. But C feels more accurate.
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Xochitl
23 days ago
Agreed, Alex. It's the overnight lending rate.
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Phillip
28 days ago
I think it's C) Federal funds rate. Seems right.
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Avery
1 month ago
100% agree, it's the Federal funds rate!
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Dortha
1 month ago
Wait, are we sure it's not the discount rate?
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Ronny
1 month ago
Prime rate is for loans, not overnight borrowing.
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Claribel
2 months ago
I thought it was LIBOR, but I guess not.
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Reyes
2 months ago
It's definitely the Federal funds rate!
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Shenika
2 months ago
Prime rate is for loans, not overnight borrowing!
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Mose
2 months ago
Wait, are we sure about that?
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Jeff
2 months ago
Yeah, C is the right answer!
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Ciara
4 months ago
I thought it was LIBOR, but I guess not.
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Sharika
4 months ago
It's definitely the Federal funds rate!
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Milly
5 months ago
I practiced a question like this before, and I think the discount rate is different from what they’re asking here. It’s definitely not that one.
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Tien
5 months ago
The prime rate sounds familiar, but I feel like that's for consumer loans, not interbank lending.
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Lezlie
5 months ago
I recall that the LIBOR is more about international lending rates, so I don't think that's it. It has to be the Federal funds rate.
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Jamal
5 months ago
I think the answer might be the Federal funds rate, but I'm not completely sure. I remember it being related to overnight lending.
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