The primary difference between the \"payoff and the \"purchase and assumption\"

Question

The primary difference between the "payoff and the "purchase and assumption" methods of handling failed banks is O A. that the FDIC is more likely to use the "payoff" method when the bank is large and it fears that depositor O B. that the FDIC guarantees all deposits when it uses the "purchase and assumption" method. losses may spur business bankruptcies and other bank failures ( C. that the FDIC is more likely to use the purchase and assumption method for small institutions because it will be easier to find a purchaser for them compared to large institutions. O D. that the FDIC guarantees all deposits when it uses the "payoff" method.

Explanation / Answer

ANSWER:

The correct answer is b because in payoff method the depositors are paid upto a certain limit and in this case it is possible that some depositors might loose out and suffer looses while the purchase and assumption method guarantees every depositor is going to be paid as this is difference under which fdic chooses payment and assumption method rather then payoff method.

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