FREE Trial

The FDIC insures bank deposits. If a banks assets are insufficient to pay off all depositors, the

Question:

The FDIC insures bank deposits. If a bank’s assets are insufficient to pay off all depositors, the FDIC will contribute enough money to ensure that all depositors can be paid off in full. (We ignore the $250,000 maximum coverage on each account.) In what way is this guarantee of deposits the provision of a put option by the FDIC?

What is the exercise price of the put option?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Answer rating: 85% (7 reviews)

The FDIC pays out an amount equal to deposits ...View the full answer


answer-question
Answered By
tutor-profile-image
Pushpinder Singh
Currently, I am PhD scholar with Indian Statistical problem, working in applied statistics and real life data problems. I have done several projects in Statistics especially Time Series data analysis, Regression Techniques. I am Master in Statistics from Indian Institute of Technology, Kanpur. I have been teaching students for various University entrance exams and passing grades in Graduation and Post-Graduation.I have expertise in solving problems in Statistics for more than 2 years now.I am a subject expert in Statistics with Assignmentpedia.com.
4.40+ 3+ Reviews 10+ Question Solved
Related Book For  answer-question
Fundamentals of Corporate Finance

Fundamentals of Corporate Finance

ISBN: 978-1260566093

10th edition

Authors: Richard Brealey, Stewart Myers, Alan Marcus

See More Books
Question Posted:
See More Questions

Related Video

A put option is a financial contract that gives the owner the right, but not the obligation, to sell an underlying asset, such as a stock or a commodity, at a predetermined price, known as the strike price, on or before a specific date, known as the expiration date. Put options are used by investors as a form of insurance against a decline in the value of the underlying asset. If an investor expects the value of an asset to fall in the future, they can purchase a put option on that asset. If the value of the asset does fall, the put option will increase in value, allowing the investor to sell the asset at the higher strike price. For example, if an investor owns 100 shares of a stock that is currently trading at $50 per share, they may purchase a put option with a strike price of $45 and an expiration date three months in the future. If the stock price falls to $40 before the expiration date, the investor can exercise the put option and sell their shares for $45 each, even though the market price is only $40. This would allow the investor to limit their losses. It\'s important to note that purchasing a put option involves paying a premium to the seller of the option, and the investor can lose the entire premium if the price of the underlying asset does not decline as expected. Put options are just one type of financial derivative and should only be used by experienced investors who understand the risks involved.

Students also viewed these Business questions

Marketing Research An Applied Orientation 7th Edition - ISBN: 013473484X - Free Book