Question

In 2008 the TED spread reached a high of

A. About 150 basis points.
B. About 250 basis points.
C. About 450 basis points.
D. About 550 basis points.

Answer 1

The TED spread peaked at about 450 basis points in 2008, indicative of high credit risk and financial instability during the financial crisis.

Step-by-step explanation:

In 2008, the TED spread reached a high of about 450 basis points. This measurement reflects the disparity between the three-month Treasury bill and the three-month LIBOR (London Interbank Offered Rate) rates. It serves as an indicator of perceived credit risk in the general economy; a higher TED spread suggests higher perceived risk of default and interbank lending concerns. The 2008 financial crisis saw a dramatic increase in the TED spread, emphasizing the dire state of bank confidence and the onset of the recession that affected global markets. This circumstance was also linked to a cascade of other financial issues such as bank runs, bankruptcies, and stock market volatility.