| The Prime Rate is the
interest rate charged by banks for short-term loans to their most
creditworthy customers whose credit standing is so high that little
risk to the lender is involved. Only a small percentage of customers
qualify for the prime rate, which tends to be the lowest going
interest rate and thus serves as a basis for other, higher risk
loans.
The rate is almost always the same
amongst major banks. Adjustments to the prime rate are made by banks
at the same time; although, the prime rate does not adjust on any
regular basis. The prime rate is not very volatile index however it
generally rises quickly but declines very slowly. The following
graph illustrates this behavior: |
