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    #1

    maturities

    Please set me clear on the following in red.

    The Fed could still set the discount rate that banks pay to borrow money from the Fed at its discount window. That charge would be set above free-market rates of similar maturities so that banks don't use the window to get a cheap source of money to lend out.

    Does the above mean "the yields or interest rates of bonds that have similar term of redemption"?

    Thank you.

  1. probus's Avatar
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    #2

    Re: maturities

    Not "term" of redemption but "date" of redemption. The maturity date of a bond, debenture or other debt obligation is the date on which all of the principal plus any unpaid interest is due to be paid. The "term to maturity" is the interval between now and the redemption date. So "free-market rates of similar maturities" means the yield at current market prices on debt obligations with similar maturity dates.
    Last edited by probus; 13-Oct-2014 at 04:15.

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