Multiple Choice
Which of the following best defines the yield to call (YTC) of a bond?
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7. Receivables and Investments
Introduction to Investments in Securities
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
What role do investment banks primarily play in the economy?
A
They insure individual bank deposits against loss.
B
They set monetary policy and control interest rates.
C
They regulate the stock market to prevent fraud.
D
They help companies raise capital by underwriting and issuing securities.
Verified step by step guidance1
Understand the role of investment banks in the economy: Investment banks primarily assist companies in raising capital by underwriting and issuing securities, which involves helping businesses sell stocks or bonds to investors.
Clarify the concept of underwriting: Underwriting is the process where investment banks assess the risk of issuing securities and agree to purchase them from the company to sell to investors, ensuring the company receives the required funds.
Explain the issuance of securities: Investment banks help companies create and distribute financial instruments like stocks and bonds, which are then sold to investors to generate capital for the company.
Differentiate investment banks from other financial institutions: Unlike commercial banks, which focus on deposits and loans, investment banks specialize in capital markets and advisory services for mergers, acquisitions, and other financial transactions.
Highlight the economic impact: By facilitating the flow of capital, investment banks play a crucial role in supporting business growth, innovation, and overall economic development.
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