The London Interbank Offered Rate (LIBOR)
A)competes with the U.S.Prime Rate for those companies with an international presence.
B)has been lower than the U.S.Prime Rate for at least the last decade.
C)is an estimate of the interbank lending rate for London banks.
D)All of these options are correct.

Question

Quizplus · Accepted Answer

The London Interbank Offered Rate (LIBOR) is a benchmark interest rate that is used globally for financial contracts, such as mortgage loans, derivatives, and credit agreements. It competes with the U.S. Prime Rate for those companies with an international presence, as they can choose to use either rate as the basis for their borrowing costs. However, LIBOR has actually been lower than the U.S. Prime Rate for the past decade. Finally, LIBOR is indeed an estimate of the interbank lending rate for London-based banks.