Question

Consider the following statements about LIBOR and choose the wrong statement
1. LIBOR stands for The London Interbank Offered Rate
2. The five currencies for which LIBOR is computed are Swiss franc, euro, pound sterling, Japanese yen and US dollar.
3. LIBOR serves maturities that range from overnight to 10 years
4. The LIBOR Scandal came to light in 2012, which is a major episode of financial collusion in which one of the world’s most influential benchmark interest rates was manipulated by various banks.
5. LIBOR will be phased out and eventually be replaced by Secured Overnight Financing Rate (SOFR) by June 2023

Answer 1

Correct Answer - Option 3 : LIBOR serves maturities that range from overnight to 10 years

The correct answer is

• LIBOR stands for The London Interbank Offered Rate
• The five currencies for which LIBOR is computed are Swiss franc, euro, pound sterling, Japanese yen and US dollar.
• The LIBOR Scandal came to light in 2012, which is a major episode of financial collusion in which one of the world’s most influential benchmark interest rates was manipulated by various banks.
• LIBOR will be phased out and eventually be replaced by Secured Overnight Financing Rate (SOFR) by June 2023

•  LIBOR serves maturities that range from overnight to one years
• The Fed has been warning banks to start preparing for a transition away from Libor to what is called the Secured Overnight Financing Rate, or SOFR.
• SOFR
  • ​Unlike LIBOR which depends on bank quotes for deciding interest rates, SOFR will use rates that investors offer for bank securities such as loans and assets backed by bonds.