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1 CHAPTER 19 INVESTMENT BANKING ANSWERS TO END-OF-CHAPTER QUESTIONS 1. Explain how investment banks and large money-center banks are similar and how they are different . While deregulation and specific court decisions have begun to blur the differences, a commercial bank, and the regulatory environment that surrounds it, is tied to accepting deposits and makign commercial loans. Investment banking activities seem to be anything other than the precise definition of a commercial bank. The Glass-Steagall Act and its interpretations, supported by the public's concern for the safety and soundness of the banking system, essentially provides the differentials between the two in the United States, but on international turf there are few differences. 2. What are the major business activities of investment banks ? The major services include: a) bringing new securities to market, b) trading and brokerage in the secondary market, c) private placements, d) merger and acquisition services, and e) whatever financing and investment services are desired by the suppliers and users of funds, except banking deposit services. 3. Why do commercial banks want to get into investment banking ? Changing technology and a relatively stable economic period over the last few years has encouraged larger, better credit quality firms to finance their short-term needs in the direct commercial paper market, rather than use the higher cost, traditional,
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This note was uploaded on 11/08/2011 for the course MAT/FIN 272 taught by Professor Burns during the Spring '11 term at Central Connecticut State University.

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