ECONOMICS
MONETARY POLICY
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
Libor has no impact on costs and availability of mortgages
|
|
|
Libor determines the costs and availability of mortgages
|
|
|
Interbank lending
|
|
|
Indicator of trust between anks & reflects the health of ban
|
Detailed explanation-1: -LIBOR is also used as a benchmark for consumer loans in many nations worldwide; therefore, it influences customers and banking institutions. The interbank rate affects the interest rates on different credit products such as credit cards, vehicle loans, and adjustable-rate mortgages.
Detailed explanation-2: -LIBOR is also the basis for consumer loans in countries around the world, so it impacts consumers just as much as it does financial institutions. The interest rates on various credit products such as credit cards, car loans, and adjustable-rate mortgages fluctuate based on the interbank rate.
Detailed explanation-3: -The LIBOR scandal had broader consequences for the financial industry and investor trust. The revelation that major banks had been manipulating a key benchmark rate shook investor confidence and led to a decline in the stock market.
Detailed explanation-4: -LIBOR is supposed to reflect reality-an average of what banks believe they would have to pay to borrow a “reasonable” amount of currency for a specified short period. That is, it represents the cost of funds-although a bank may not actually have a need for the funds on any given day.