One Reason Given for the Collapse in the Savings and Loan

question 67

Multiple Choice

One reason given for the collapse in the savings and loan industry in the late 1980s and early 1990s is

• A) the lack of government insurance on savings and loan deposits.
• B) that savings and loan investments were limited to relatively low-yielding government bonds.
• C) that the savings and loan banks required significant amounts of owner-provided funds to be profitable.
• D) that their reserve requirements were greater than those for commercial banks.
• E) that they made risky short-term loans during an era of financial deregulation and lax regulatory supervision.

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Definitions:

Cost of Equipment

The total expenditure for purchasing machinery, tools, and other hardware used in production or office environments.

Total Cost Approach

A decision-making process that considers the total direct and indirect costs associated with a purchase or investment, rather than just the acquisition price.

Discount Rate

The interest rate charged by central banks on loans to commercial banks or the rate used in discounted cash flow analysis to determine the present value of future cash flows.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against a company's assets over their life up to a specific point in time.