Question

Rewrite this with a little worse grammar but dont make it bad, just need it good enough for a test

The federal funds rate is the interest rate at which banks lend reserves to each other overnight, while the discount rate is the interest rate that banks pay when they borrow directly from the Federal Reserve, usually on a short-term basis. In contrast, the prime rate is the interest rate that banks offer to their most creditworthy customers for loans, typically influenced by the federal funds rate but set independently by financial institutions. While the federal funds rate and discount rate are key tools for monetary policy and directly set by the Federal Reserve, the prime rate reflects the competitive lending environment among banks

Answer 1

The federal funds rate is the interest rate that banks use to lend reserves to one another overnight. The discount rate, on the other hand, is the interest rate that banks have to pay when they borrow directly from the Federal Reserve, and this is usually short-term. Then there’s the prime rate, which is the interest rate that banks give to their most creditworthy customers for loans. The prime rate is usually influenced by the federal funds rate, but banks set it on their own. While the federal funds rate and the discount rate are important tools for monetary policy and are directly set by the Federal Reserve, the prime rate shows how banks compete in lending.