Exploring 3 Types of Prime Rates

Whether you are investing in a treasury note or securing a mortgage loan, finding the best prime rate for you should be a top priority. It's simple. A 20 minute online search along with info from a bank official will help you choose the best prime rate for your purpose. So, what's the difference in the rates?



Comparing Prime Rates:

To begin comparing prime rates a borrower should understand the rates that are available on the market. Primarily, there are three main rates available:

• Wall Street Journal
• Federal Discount Rate
• Federal Funds Rate

Of the three rates, the Federal Funds Rate carries the most significance. It influences interest rates and the economy. The Federal Funds Rate ensures the costs associated with overnight lending and determines returns of bank deposit products, your money market and regular savings accounts, etc.  Still, both the Federal Discount Rate and the Federal Funds Rate affect the quoted Wall Street Journal Rate in the long run.                



On Treasury Notes:

So, there really is a link to the prime rates on mortgages and interest bearing treasury notes. Long-term treasury notes that exceed a maturity of more than two years yield returns based on the Federal Funds rate.

Comparing the rates, you will notice that the interest does not fluctuate often. Predictability encourages investors to purchase longer term notes.




Issues:

If you are interested in knowing more specific formulas for determing yields on treasury notes or borrowing costs of mortgages, you should speak to a bank official. Mention the Federal Funds rate for more information.








                                                                     SOURCES:
                                -http://www.bankrate.com/rates/interest-rates/prime-rate.aspx
                                -http://www.treasury.gov/

                                                                       KEYWORDS:
                                                     prime rates; treasury notes; mortgages