Under the Purchase-And-Assumption Method, the FDIC Usually Finds It

question 9

Multiple Choice

Under the purchase-and-assumption method, the FDIC usually finds it:

• A) can sell the failed bank for more than the bank is actually worth.
• B) can sell the bank at a price equaling the value of the failed banks assets.
• C) has to sell the bank at a negative price since the bank is insolvent.
• D) cannot sell the bank and almost always has to revert to the payoff method for dealing with a failed bank.

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Definitions:

Break-Even Point

The production level or sales volume at which total revenues equal total costs, resulting in neither profit nor loss.

Margin of Safety

The difference between actual sales and the break-even point, indicating the level of risk in not covering fixed costs.

Composite Units

A measure used in costing to represent a bundle or mix of goods or services treated as a single unit.

Break-Even Point

The financial state in which total costs equal total revenues, resulting in neither profit nor loss.