Question

what is the prime rate?
a. the prime rate is the best interest rate that banks offer their most creditworthy customers.
b. the prime rate is the interest rate on a credit card, unadjusted for interval compounding.
c. the prime rate is the number which indicates your credit history.
d. the prime rate is the highest interest rate allowed by law.

Explanation:

Define the prime rate

The prime rate is the benchmark interest rate that commercial banks charge their most creditworthy corporate customers for short-term loans.

Evaluate the given options

• Option (a) correctly defines the prime rate as the best interest rate offered to the most creditworthy customers.
• Option (b) describes a nominal annual percentage rate (APR) on a credit card, not the prime rate.
• Option (c) describes a credit score, not an interest rate.
• Option (d) describes a usury limit or legal maximum interest rate, not the prime rate.

Answer:

• a. The prime rate is the best interest rate that banks offer their most creditworthy customers. (Correct answer)
• b. The prime rate is the interest rate on a credit card, unadjusted for interval compounding.
• c. The prime rate is the number which indicates your credit history.
• d. The prime rate is the highest interest rate allowed by law.