Chapter 6, Problem 12AA

To determine

To analyze: The reasons for considering the deposit up to $100,000 in savings institution or bank as safe.

Explanation of Solution

Saving institutions are banks that represent a particular community, often referred to as thrift institutions. In the form of mortgages, commercial loans, and small company loans, they take the deposits of local residents and lend the money back.

The deposit up to $100,000 is considered safe in savings institutions and banks because if the insured entity defaults, the entire amount of savings of up to $ 100,000 for each legally separate account is paid back.