During financial crises, short-term interest rates will often change quickly (typically up) as indications that markets are under severe stress. The interest rates shown in the following table are for selected dates in September–October 2008. Different publications define the TED Spread in different ways. Here, we focus on the TED spread on U.K. interest rates. One measure is the differential between the 3-month British pound LIBOR interest rate and the 3-month U.K. Government bond yield.

a. Calculate the U.K. TED spread—the difference between the two market rates shown in the table—in September and October 2008.

b. On what date is the spread the narrowest? The widest?

c. When the spread widens dramatically, presumably demonstrating some sort of financial anxiety, which of the rates moves the most and why?