Question

what is the primary function of fdic insurance? *
a. to guarantee that a savings account’s apy will never drop below a certain rate.
b. to insure against loss of purchasing power due to inflation.
c. to insure credit unions and their members’ deposits, but not traditional banks.
d. to provide federal protection for deposits up to $250,000 at a traditional bank

Explanation:

• Option A: FDIC insurance does not relate to APY rates of savings accounts. APY (Annual Percentage Yield) is about the interest earned, and FDIC is about deposit protection, so A is incorrect.
• Option B: FDIC insurance has nothing to do with protecting against inflation - related loss of purchasing power. Inflation protection would be related to investments like TIPS or other inflation - hedging instruments, so B is incorrect.
• Option C: FDIC insures deposits in traditional banks (and thrifts), while credit unions are insured by the NCUA (National Credit Union Administration), not FDIC. So C is incorrect.
• Option D: The primary function of FDIC (Federal Deposit Insurance Corporation) insurance is to provide federal protection for deposits (such as checking, savings, etc.) up to $250,000 per depositor, per insured bank. This matches the description in option D.

Answer:

D. To provide federal protection for deposits up to $250,000 at a traditional bank