Answered: . Consider a failing bank. How much is…

. Consider a failing bank. How much is a deposit of$290,000 worth to the depositor. if the FDIC uses thepayoff method? The purchase-and-assumption method?Which method is more costly to taxpayers?

Century 21 Accounting General Journal

11th Edition

ISBN:9781337680059

Author:Gilbertson

Publisher:Gilbertson

Chapter18: Acquiring Capital For Growth And Development

Section18.2: Long-term Debt Financing

Problem 2AYU

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Question

. Consider a failing bank. How much is a deposit of
$290,000 worth to the depositor. if the FDIC uses the
payoff method? The purchase-and-assumption method?
Which method is more costly to taxpayers?

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Consider a failing bank. How much is a deposit of $300,000 if the CDIC uses the payoff method? The purchase-and-assumption method? Which method is more costly to taxpayers? Using the payoff method, the $300,000 deposit is worth $ (Round to the nearest dollar) Using the purchase-and-assumption method, a deposit of $300,000 is worth $ (Round to the nearest dollar) Which method is more costly to taxpayers? Select the best answer: A. The payoff method is more costly, since taxpayers will only pay $0.10 on the dollar. B. The purchase and assumption method is more costly, because depositors receive the full value of their deposits. C. The purchase and assumption method is more costly, because depositors will refuse to keep account balances in excess of $100,000 in a single bank. D. The payoff method is more costly, since the cost to insure the fund will be lower.
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