prime-rate

Vocabulary Word

Definition

The 'prime rate' is the interest rate banks give to their most credit-worthy customers. Usually, it's agreed on by leading banks and is guided by the country's central bank.

Examples in Different Contexts

In personal finance, understanding the 'prime rate' can help individuals make informed decisions about loans and credit. A financial advisor might suggest, 'Keeping an eye on the prime rate can help you choose the best time to take out a loan or refinance your mortgage.'

Practice Scenarios

Tech

Scenario:

Given the changes in economic dynamics, we may need to update the interest computation algorithm on our lending platform.

Response:

Absolutely, we should ensure that our platform adjusts to the current prime rate to keep our lending service competitive.

Accounting

Scenario:

The company's increased borrowing costs have significantly affected the financial health. Perhaps we need to revisit our financial strategies.

Response:

Right, the change in prime rate has increased our debt servicing costs and it's necessary to review our financial policies.