Which of the Following Is NOT a Reason That Firms

question 96

Multiple Choice

Which of the following is NOT a reason that firms in the shadow banking system were more vulnerable than commercial banks during the financial crisis of 2007-2009?

• A) They could invest in riskier assets.
• B) Investors had no insurance against loss of principal.
• C) They made investments that would lose value if housing prices decline.
• D) They were more heavily regulated than commercial banks, making them less able to adjust to changing market conditions.

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Definitions:

Indefinite Useful Life

An intangible asset that is not expected to deplete over a measurable period of time, and hence is not amortized.

Consolidated Income Statement

A financial statement that shows the aggregate operating results of a parent company and its subsidiaries as if the group were a single entity.

FVE Method

FVE Method, or Fair Value Estimation Method, involves estimating the fair value of an asset or liability, taking into account market conditions and other influencing factors.

Equity Method

An accounting technique used when a company invests in another company and has significant influence, typically reflected by owning 20% to 50% of the voting stock, whereby the investment is initially recorded at cost and subsequently adjusted for the investing company's share of the investee's net profits or losses.