True or False QuestionThe prime rate is reserved for a commercial bank's best customers.True false question.TrueFalse

The statement is True.

The prime rate is indeed the interest rate that commercial banks charge their most creditworthy customers, typically large corporations or financially stable businesses. This rate serves as a benchmark for other loans and credit products. It reflects the lowest interest rate at which money can be borrowed, and it varies slightly between different banks but generally aligns closely with the federal funds rate set by the central bank.

Banks are willing to offer this lower rate to their best customers because they present less risk, meaning they are more likely to repay the loan. Thus, the prime rate can also serve as an economic indicator, as changes in this rate can influence borrowing and spending in the economy.

In summary, the prime rate is primarily reserved for the best and most reliable customers of a bank, affirming that the statement is true.