Federal Funds Rate
The Federal Funds Rate is the interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution overnight. An example of this is when a bank lends its excess reserve funds to another bank for a day, the interest rate paid for this loan is the Federal Funds Rate.
The formula for the Federal Funds Rate is the total amount of loans divided by the total amount of deposits multiplied by the interest rate. For example, if a bank has $100,000 in loans and $200,000 in deposits and the interest rate is 5%, the Federal Funds Rate would be 2.5%.