Question

LIBOR is generally ________ the Fed funds rate because foreign bank deposits are generally ________ than domestic bank deposits.

Group of answer choices

greater than; riskier

greater than; less risky

less than; riskier

the same as; equally risk

less than; less risky

Answer 1

LIBOR is generally greater than the Fed funds rate because foreign bank deposits are generally riskier than domestic bank deposits.

The discount rate higer in Fed funds rate so the banks are prefer to borrow from one another rather than pay higher interest to Fed Funds.

LIBOR rate is going on overall interest rate of environment so it is increasing the lending banks believe interest rate are increasing and lending market is riskier.

So,the option first is correct greater than ;riskier