Question
Nambia is an African country with the unit of currency of the Namib with 160 namibs []equal to $1.00 and 192 equal to 1. Nambia
Nambia is an African country with the unit of currency of the Namib with 160 namibs []equal to $1.00 and 192 equal to 1. Nambia has a deposit insurance system that provides for coverage up to a limit of 150,000,000 per all eligible accounts in aggregate per bank. Not all accounts are covered by the Nambian deposit insurance system, which specifically excludes CDs with maturities in excess of 1 year and all inter-bank accounts. However, foreign currency accounts are included within the overall limit.
Suppose that an account holder has the following exposure in a bank that failed:
Savings Account = 17,250,000
Current Account = 19,250,000
CD (I year) = 32,250,000
CD (2 year) = 19,500,000
CD (3 year) = 12,000,000
Foreign Currency Account-1: $500
Foreign Currency Account-2:500
If there is currently no coinsurance in Nambia, how much can the account holder recover and how much does the account holder lose in the event that the bank goes insolvent? Express in both monetary amounts and percentage terms. [B1](3 marks)
Part-2
The Nambian government wants to reduce costs and exposure to deposit insurance claims from depositors in insolvent banks enrolled in the Nambian Deposit Insurance Scheme. Suppose that it introduces co-insurance. Recalculate the amount the account holder recovers and how much does the account holder lose in the event that the bank goes insolvent using the data in question 3a. above. Use co-insurance at rate of 20%. (Note: in effect this reduces maximum amount recoverable to 1,600,000) [B1](2 marks)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started