Question

Eileen puts $10,000 in an uninsured savings account at the First National Bank. Norma borrows $10,000 from the First National Bank, flies to a South Pacific island, and is never heard from again. Which of the following is true?

a. Eileen will lose her $10,000.
b. Eileen will lose her $10,000 if she and Norma are related.
c. Eileen will lose her $10,000 if the First National Bank makes all of its loans to people who run off to the South Pacific islands.
d. Eileen will not lose her $10,000 no matter what happens to the First National Bank.
e. Eileen will not lose her $10,000 unless the Fed fails.

Answer 1

The option which is true is:

C. Eileen will lose her $10,000 if the First National Bank makes all of its loans to people who run off to the South Pacific islands.

Step-by-step explanation:

Mentioned details in the given question are:

Eileen has kept $10,000 in am account which is uninsured savings account at a bank i.e. First national bank.

Norma is borrowing money from the First national bank amounting $10,000 and without any repayment flies to South pacific island and she didn't made any contact further.

So, seeing the above scenario the true option is

C. Eileen will lose her $10,000 if the First National Bank makes all of its loans to people who run off to the South Pacific islands.

So, the option says that Eileen will loose all her money if the bank n which she had her uninsured savings account is because the people are borrowing money from that bank and have no option of returning the same. So, this would have effect on the other bank account holders.