Question 5
What are the core business activities of investment banks?
• Investment banks help businesses and governments sell their new
securities in the primary market
• After the securities are sold, investment bankers make secondary
markets for the securities as brokers and dealers.
b. What is underwriting by investment banks? What is the risk involved
in underwriting for investment banks?
Underwriting involves the bank investing risk
The investment bank guarantees to buy the new securities at a fixed
price
The risk is that the bank sells it at a price less than this amount