n.
The lowest rate of interest on bank loans at a given time and place, offered to preferred borrowers. Also called prime interest rate.
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American Heritage Dictionary:
prime rate |
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Barron's Finance & Investment Dictionary:
prime rate |
| Prime Paper, Prime | |
| Prime Rate Fund, Principal |
Barron's Real Estate Dictionary:
prime rate |
| Primary Residence, Primary Mortgage Market | |
| Prime Tenant, Principal |
West's Encyclopedia of American Law:
Prime Lending Rate |
The lowest rate of interest that a financial institution, such as a bank, charges its best customers, usually large corporations, for short-term unsecured loans.
The prime lending rate is an economic indicator and is often used as a measuring point for adjusting interest rates on other types of loans. The rate varies according to economic factors.
Dictionary of Cultural Literacy: Economics:
prime rate |
The interest rate that banks charge to corporations that are considered excellent risks.
Investopedia Financial Dictionary:
Prime Rate |
The interest rate that commercial banks charge their most credit-worthy customers. Generally a bank's best customers consist of large corporations. The prime interest rate, or prime lending rate, is largely determined by the federal funds rate, which is the overnight rate which banks lend to one another. The prime rate is also important for retail customers, as the prime rate directly affects the lending rates which are available for mortgage, small business and personal loans.
Investopedia Says:
Default risk is the main determiner of the interest rate a bank will charge a borrower. Because a bank's best customers have little chance of defaulting, the bank can charge them a rate that is lower than the rate that would be charged to a customer who has a higher likelihood of defaulting on a loan.
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Wikipedia on Answers.com:
Prime rate |
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The examples and perspective in this article may not represent a worldwide view of the subject. Please improve this article and discuss the issue on the talk page. (December 2010) |
Prime rate or prime lending rate is a term applied in many countries to a reference interest rate used by banks. The term originally indicated the rate of interest at which banks lent to favored customers, i.e., those with high credibility, though this is no longer always the case. Some variable interest rates may be expressed as a percentage above or below prime rate.
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Historically, in North American banking, the prime rate was the actual interest rate although this is no longer the case. The prime rate varies little among banks, and adjustments are generally made by banks at the same time, although this does not happen with frequency. The prime rate is currently 3.25% in the United States,[1] and the Canadian prime rate is currently 3.00%.[2]
In the U.S., the prime rate runs approximately 300 basis points (or 3 percentage points) above the federal funds rate, the interest rate that banks charge to each other for overnight loans made to fulfill reserve funding requirements: (federal funds rate) + (3 %) = (prime rate). The Federal funds rate plus a much smaller increment is frequently used for lending to the most creditworthy borrowers today, as is LIBOR, the London Interbank Offered Rate. The Federal Open Market Committee (FOMC) meets eight times per year wherein they set a target for the federal funds rate. Other rates, including the prime rate, derive from this base rate.
Prior to December 17, 2008, when 23 out of 30 of the United States' largest banks changed their prime rate, the Wall Street Journal would change its published rate. On December 17, 2008, the Wall Street Journal recognized that fewer, but larger banks controlled most assets and changed the methodology for the prime rate that is published. The Journal's rate today now reflects the base rate posted by at least 70% of the top ten banks by assets.
The prime rate is used often as an index in calculating rate changes to adjustable rate mortgages (ARM) and other variable rate short term loans. It is used in the calculation of some private student loans. Many credit cards and home equity lines of credit with variable interest rates have their rate specified as the prime rate (index) plus a fixed value commonly called the spread or margin.
This entry is from Wikipedia, the leading user-contributed encyclopedia. It may not have been reviewed by professional editors (see full disclaimer)
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![]() | American Heritage Dictionary. The American Heritage® Dictionary of the English Language, Fourth Edition Copyright © 2007, 2000 by Houghton Mifflin Company. Updated in 2009. Published by Houghton Mifflin Company. All rights reserved. Read more |
![]() | Barron's Finance & Investment Dictionary. Dictionary of Finance and Investment Terms. Copyright © 2010 by Barron's Educational Series, Inc. All rights reserved. Read more | |
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![]() | Dictionary of Cultural Literacy: Economics. The New Dictionary of Cultural Literacy, Third Edition Edited by E.D. Hirsch, Jr., Joseph F. Kett, and James Trefil. Copyright © 2002 by Houghton Mifflin Company. Published by Houghton Mifflin. All rights reserved. Read more |
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