Question

Suppose that tim currently holds a checking account balance of $125 in the commercial bank down the street. his is the only owner of the account. if the bank failed this afternoon, the maximum amount of coverage that would be provided by the bank insurance fund is $125. this statement is:

Answer 1

The maximum coverage provided by the bank insurance fund is not limited to $125. Depositors are guaranteed up to $250,000 of their money in each account if a bank fails.

Step-by-step explanation:

The statement provided in the question is incorrect. The maximum amount of coverage provided by the bank insurance fund is not limited to $125. The government guarantees that depositors will receive up to $250,000 of their money in each account if a bank fails. This means that if Tim's checking account balance is $125 and the bank fails, he would be eligible for the full coverage of $250,000.

Deposit insurance is a protection offered by the government to ensure the safety of depositor's funds in case of a bank failure. The Federal Deposit Insurance Corporation (FDIC) is responsible for providing this insurance. It collects deposits from banks and uses the funds to pay depositors in the event of a bank failure.

Since Tim holds $125 in his checking account, his balance would be fully covered by the insurance in case of a bank failure. However, it's important to note that the maximum coverage applies per depositor, not per account. If Tim had multiple accounts with the bank, the total coverage for all his accounts combined would still be $250,000.