When Risk-Taking Is Not Actuarially Fairly Priced into Deposit Insurance

question 81

Multiple Choice

When risk-taking is not actuarially fairly priced into deposit insurance premiums

• A)depositors are required to pay the shortfall in funds collected.
• B)there is an increase in the incentives for owners of DIs to take additional risk.
• C)deposit insurance premiums are more costly than economically justified.
• D)depositors will be unprotected should the DI become insolvent and fail.

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Definitions:

Beginning Inventory

The initial worth of a firm's stock before any transactions, such as buys or sales, happen at the beginning of an accounting cycle.

Cost of Goods Sold

The direct expenses associated with manufacturing the products sold by a business.

Beginning Inventory

The cost of commodities available for trading at the commencement of an accounting interval.

Ending Inventory

The value of goods available for sale at the end of an accounting period, calculated by adding purchases to beginning inventory and subtracting the cost of goods sold.