Is it legal for a bank to offer an investment instrument that gives interest based on the LIBOR rate?

If the LIBOR rate is more than a certain %age then the instrument receives no interest.

It is not illegal for banks to use the Libor. Banks can use any index they chose to use it just that on certain products they chose to use LIBOR.

Other products might be measured by the 9th district cost of funds, some are measured by the Prime rate.

Indexes are used to determine on anyone given day if a rate should be raised, lowered or remain the same. Some are raised or lowered monthly, quarterly or semi-annually.

I hope this has been of some use to you, good luck.

"FIGHT ON"

It's not illegal? Many institutions use LIBOR to set rates on loans. As a matter of fact, the mortgage instruments of the sub-prime market are based on LIBOR. If they're offering LIBOR, take it. The current Fed fund rate is 5.25%, but the current 1 month LIBOR is 5.35%, 10 basis points higher than U.S. rates.

It's not illegal

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