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If you have an adjustable-rate mortgage, there is a good chance you are familiar with something called Libor. The interest rate on many ARMs is tied to Libor, which stands for London Interbank Offered Rate.
In effect, Libor is an average of the interest rates banks charge to one another. Watch this Khan Academy video to learn exactly what Libor represents and how it differs from the Federal Reserve’s federal funds rate.
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