ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -However, the eurodollar market remains the largest. Interest rates paid on deposits in the eurocurrency market are typically higher than in the domestic market. That is because the depositor is not protected by the same national banking laws and does not have governmental deposit insurance.

Detailed explanation-2: -Eurocurrency Market consists of banks that accept deposits and make loans in foreign currencies outside the country of issue. Eurodollar could be broadly defined as dollar-denominated deposits in banks all over the world except the United States. Certificate of deposit (CD) is a negotiable instrument issued by a bank.

Detailed explanation-3: -Answer and Explanation: The answer is (A) London Interbank Offered Rate. The London Interbank Offered Rate or LIBOR is the rate of interest used as a benchmark for the cost of interbank loans around the world. LIBOR is determined for the euro, the U.S. dollar, the Swiss franc, the British pound, and the Japanese yen.

Detailed explanation-4: -In domestic markets, funds are denominated in the local currency and governed by the regulations applying to the domestic currency. In the Euromarket, by contrast, funds are intermediated outside domestic central banking jurisdiction.

Detailed explanation-5: -Because the Eurocurrency market is unregulated, there is a higher risk that bank failure could cause depositors to lose funds.