What is a discount rate?
Discount rates can identify two different types of financial activity. One common use of the term has to do with the amount of interest that private banks pay to the United States Federal Reserve System in return for loan financing. The second application of the term has to do with the charge that merchants pay in order to process credit card payments as part of doing business. When it comes to a Federal Reserve Discount Rate, the discount rate process lets the banks and other financial institutions to receive loans from the Federal Reserve at rates that are considered to be very competitive. This extension of a discount rate has an impact in two different ways. The immediate effect is that it makes it possible for financial institutions to pass on a portion of the savings to their clients. However, the extension of a discount rate through the Federal Reserve can have a far reaching impact on investors and the function of various investment markets. Bond markets tend to react to the ch
