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Which of the following rates is the interest rate at which banks borrow and lend to each other on an overnight basis?
Correct Answer: C
Step by Step Explanation: * Federal Funds Rate: The rate at which depository institutions lend reserves to each other overnight. It is set by the Federal Open Market Committee (FOMC). * Other Rates: * Prime Rate: Rate banks charge their most creditworthy customers. * Discount Rate: Rate the Federal Reserve charges banks for borrowing directly from it. * LIBOR: Interbank lending rate used internationally, now being phased out. References: * Federal Reserve Explanation of Rates: Federal Funds Rate.