The Flat-Rate Insurance Provided by the FDIC Has Two Faults

question 13

Multiple Choice

The flat-rate insurance provided by the FDIC has two faults.First,it misprizes risk.Second,

• A) it penalizes large thrifts by making them subsidize smaller ones by paying the same rate
• B) it forces conservatively managed thrifts to subsidize those with more risky investments
• C) it is not adjustable to reflect the actual market conditions that are met by commercial financial institutions
• D) the rates are too high to be paid by a thrift without a large number of depositors

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Definitions:

Total Income

The sum of all revenue and gains a company or individual earns within a specific period, including sales, interest, and dividends.

Net Cash Flows

The difference between a company's cash inflows and outflows over a specific period.

Payback Period

The period of time required for an investment to generate cash flows sufficient to recover its initial cost.

Factory Overhead

All indirect costs associated with the manufacturing process, excluding direct materials and direct labor costs.