Because the prime interest rate — the interest rate commercial banks charge their most credit - worthy customers — is largely
based on the federal funds rate.
The short - term yield is
dependent on the federal funds rate, which is set by the US Federal Reserve to fulfill its mandate of maximizing employment, stabilizing prices, and moderating long - term interest rates.
The prime rate is more local than the LIBOR rate — it's based
on the federal funds rate of the Federal Reserve, the benchmark of all US - based benchmarks.
A home equity line of credit, or HELOC, has an adjustable rate of interest attached to paying it off, which means that your payments can fluctuate
based on the federal funds rate.
Prime rates are based
on federal fund rates.
For example, the average money market fund yields just 0.88 % — falling short of the 1 % to 1.25 % range
on the federal funds rate.
In the United States, the interest rate, or the amount charged by lender to a borrower, is based
on the federal funds rate that is determined by the Federal Reserve (sometimes called «the Fed»).
The interest rate for this investment margin account borrowing will fluctuate based
on the Federal Funds Rate plus 50 basis points with interest only payable monthly.