Question

which statement is true? in a commercial bank the money comes from investments, while in an investment bank, the money comes from depositors. if investors begin to doubt the solvency of an investment bank, it may lead the long-term loans to disappear more quickly because they are rolled over on a less frequent basis. the investments of investment banks are insured by the federal deposit insurance corporation (fdic) up to $250,000. the shadow banking system includes investment banks, hedge funds, and money market funds, as well as a variety of other complex financial entities.

Answer 1

The true statement is that the shadow banking system includes investment banks, hedge funds, and money market funds. Commercial banks receive money from depositors, while investment banks focus on securities and investment services. FDIC insurance applies to commercial bank deposits, not investment bank investments.

Step-by-step explanation:

The statement that is true among the ones provided is that the shadow banking system includes investment banks, hedge funds, and money market funds, as well as a variety of other complex financial entities. The error in the other statements lies in the mischaracterization of investment banks and commercial banks. In a commercial bank, the money primarily comes from depositors who open savings and checking accounts, while an investment bank raises funds by issuing and selling securities, providing investment advice, and through other activities like market making or trading of derivatives and equity securities. When it comes to insurance, it is the investments in commercial banks that are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000, not the investments of investment banks.