Financial Industry Regulatory Authority (FINRA) Practice Exam 2026 - Free FINRA Practice Questions and Study Guide

The correct answer is indicative of the call loan rate, which is specifically relevant in the context of margin transactions conducted by broker-dealers. The call loan rate refers to the interest rate charged by banks on loans that can be called in at any time, often used to finance margin transactions where securities are purchased on credit.

Broker-dealers frequently borrow funds from banks to facilitate providing margin loans to their clients. The call loan rate directly influences the cost of these margin loans since broker-dealers often pass on the cost of borrowing to their customers. This rate can fluctuate based on market conditions and the availability of credit in the banking system.

In contrast, while the prime rate is a benchmark for various loans and could influence margin loan interest rates, it does not specifically pertain to broker-dealer transactions. The federal funds rate indicates the interest rate at which banks lend reserves to each other overnight and serves as a monetary policy tool rather than a direct factor in margin transactions. The discount rate is the interest rate set by the Federal Reserve for loans to commercial banks and is not a direct rate applied to broker-dealer margin transactions either. Thus, the call loan rate is the most relevant choice for this particular scenario.