Question

Karen has deposited $500,000 into her individual money market savings account. If her FDIC-insured bank were to fail, how much of her account balance is she insured for?

A) $100,000
B) $250,000
C) $500,000
D) $500,000 plus interest

Answer 1

Karen is insured for $250,000 by the FDIC for her $500,000 deposit in an FDIC-insured bank. The covered amount includes principal and any interest earned, as long as the total does not surpass the insurance limit.

Step-by-step explanation:

Karen has deposited $500,000 into her individual money market savings account. If her FDIC-insured bank were to fail, Karen is insured for $250,000. This is because the Federal Deposit Insurance Corporation (FDIC) provides deposit insurance for bank deposits up to a limit of $250,000 per account holder, per insured bank, for each account ownership category. The amount was raised from $100,000 to $250,000 in 2008 to provide greater protection for depositors.

Therefore, the correct answer to the question is B) $250,000. This FDIC insurance ensures that Karen will receive up to the insured amount, even though her current balance exceeds it. Interest earned on the account would be included in the insured amount, provided it does not exceed the $250,000 limit.