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

Business

Scenario:

Looking at the market volatility, we might need to rethink our investment strategies and consider the burden of increased borrowing costs.

Response:

Yes, the increase in prime rate will make borrowing more expensive. We might need to find more cost-effective ways to finance our expansion.

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.