A client is an owner of a semi-large firm in Kansas, but they want to retain their dollars for use later to pay for goods purchased from other U.S. firms. The client has decided to take some funds and invest in Barclays Bank in London. What would the client's funds be known as once the investment is made?

Question

Quizplus · Accepted Answer

Once a client funds are placed in Barclays Bank in London, the funds become known as Eurodollars - this is regardless of what bank as long as it is a European bank. The Eurocurrency market provides an important alternative to domestic sources of funds or investments instead of focusing on local currency. The interest rate in the Eurodollar market is usually related to the London interbank offer rate or more commonly known, LIBOR. The cost to borrow in the Eurocurrency market is usually stated as a margin above LIBOR and the borrowing rates are between .05 percent and 3 percent over LIBOR. The Eurocurrency loans range in maturity up to 10 years for the best quality borrowers.

A Client Is an Owner of a Semi-Large Firm in Kansas