What is the Discount Rate?

Definition of Discount Rate: It is explained as the interest rate which is assessed for borrowing the short term funds from the bank in a direct manner. The Federal Bank in U.S.A offers loan short term moneys in a direct way to member the organizations at this specific charge. The discount fee is regarded as one of the two rates made by the Fed and the other one is known as Fed Fund Rate. This specific charge is the one that is utilized by a member institution to credit the balances to other people quickly. The Fed plans the Discount Rate in a direct manner, but most of the banks can exchange money from another source like the rate setting that does not offer support to the implementation of the monetary policy. The expression “discount rate” has two meanings related with the financial calculations. It is utilized in performing the existing value computations and in finding the nominal cost of the Treasury Bills.