Question

LIBOR is A. a resource used in production. B. an interest rate paid on Eurodollar loans in the London market. C. an interest rate paid by European firms when they borrow Eurodollar deposits from U.S. banks. D. the interest rate paid by the British government on its long-term bonds.

Answer 1

Answer:

B. an interest rate paid on Eurodollar loans in the London market.

Explanation:

London InterBank Offered Rate (LIBOR)

This is simillar to the federal funds rate.

It is a rate at which banks offer fonds to other banks, thus "interbank", for short-term loans.

It is generallyaccepted to evaluate and compare interest rate and indicate the borrowing cost between banks.

It is based on five currencies:

• the US dollar
• the euro
• the British pound
• the Japanese yen
• and the Swiss franc

Also, there are LIBOR for different maturities:

• overnight,
• one week,
• one month,
• two months,
• three months,
• six months
• and a year.