If the FDIC Eliminated Its Insurance Program for Deposits, Then

question 45

Multiple Choice

If the FDIC eliminated its insurance program for deposits, then

• A) the banking system would probably fail.
• B) individual depositors would have more incentive to ascertain the soundness and solvency of the bank.
• C) banks would probably hold fewer reserves.
• D) moral hazard would be increased.

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Definitions:

Debt Extinguishment

Refers to the process of permanently removing a debt obligation through payment or other financial arrangements.

Maturity Value

The amount payable to an investor at the end of a bond's term or an investment's life.

Accrued Interest

The interest that has accumulated over a period of time but has not yet been paid by the borrower.

Contingencies

Conditional liabilities or assets that may arise due to future events, whose effects cannot be determined with certainty at the present time.