Question

Which is true about overnight rates?

a. All of the options

b. Banks are required to maintain a certain amount of cash, known as a reserve, with the central bank so they borrow at an overnight rate to fulfill the requirement

c. The rate at which banks borrow or lend from each other

d. Unsecured borrowing and lending between banks as they adjust the reserve requirements, the interest paid is the overnight rate

Answer 1

Step-by-step explanation:

a. All of the options are true about overnight rates.

Overnight rates refer to the interest rates that banks charge each other for borrowing or lending money overnight. Banks are required to maintain a certain amount of cash, known as a reserve, with the central bank so they borrow at an overnight rate to fulfill the requirement. The overnight rate is the rate at which banks borrow or lend from each other, and it is determined by the supply and demand for funds in the market. Unsecured borrowing and lending between banks as they adjust the reserve requirements, the interest paid is the overnight rate. Therefore, all of the options are true about overnight rates.