Question

primary difference between the “payoff” and the “purchase and assumption” methods of handling failed banks is that ____

A) The CDIC is less likely to use “payoff” method for the large bank fearing depositor losses may spur business bankruptcies

B) The CDIC guarantees all deposits, not just those under $100,000 limit, when it uses the “purchase and assumption” method

C) Both (A) and (B)

D) Neither (A) nor (B)

Answer 1

Only correct answer will be option( A) because CDIC will only be using purchase and assumption method businesses because payoff methods for larger Bank can lead to depositors losing higher amount of their money.

In pay off method, CDIC allows banks to fail and they will be paying upto 1 lakh

CDIC will be guaranteeing all deposits under 1,00,000 under pay off method not purchase and assumption method so option( B )is false.

Correct answer will be option ( A).