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Finance Dictionary and Glossary of Investment Terms
The interest rate that the Federal Reserve charges a bank to borrow funds when a bank is temporarily short of funds. Collateral is necessary to borrow, and such borrowing is quite limited because the Fed views it as a privilege to be used to meet short-term liquidity needs, and not a device to increase earnings.
1. The interest rate that an eligible depository institution is charged to borrow short term funds directly from a Federal Reserve Bank. 2. The interest rate used in determining the present value of future cash flows.