Question

Some commercial mortgages have adjustable, or floating, interest rates. The index rate to which the contract rate is tied is typically which of the following for commercial mortgages?A. The yield on a constant maturity Treasury security of the same term

B. The cost of funds index (COFI)
C. The London Interbank Offer Rate (LIBOR)
D. The interest rate on a comparable maturity level-payment mortgage

Answer 1

The London Interbank Offer Rate (LIBOR)

Step-by-step explanation:

London Interbank Offered Rate (LIBOR) is simply the average rate at which international banks borrow from each other and it is based on five international currencies such as British pound, the euro, the US dollar, swiss franc and Japanese yen. LIBOR is one of the benchmark interest rate indexes that are mostly used to effect adjustments to mortgage rates that are adjustable.