The Shadow Banking System Describes a Group of Institutions That

question 32

True/False

The shadow banking system describes a group of institutions that engage in lending activities, much like traditional banks, but these institutions do not accept deposits and are therefore not subject to the same regulations as traditional banks.

---

Definitions:

Premium on Bonds Payable

The amount by which the sale price of a bond exceeds its face value, reflecting higher-than-market interest rates or increased demand for the bond.

Amortization

The process of spreading out a loan or intangible asset cost over a fixed period of time for accounting and tax purposes.

Straight-Line Method

A method of allocating the cost of an asset evenly over its useful life.

Callable Bonds

Securities that the issuer has the option to repurchase before they reach their due date, at a specified call price.