CQIB - Chapter 1 - BUSINESS OF BANKING (80
QUESTIONS WITH COMPLETE SOLUTIONS)
financial intermediation - answer The process of
| | | || | |
pooling funds from savers and using these to
| | | | | | | |
provide loans to borrowers. The bank acts as a go
| | | | | | | | | |
between or intermediary for those who have extra
| | | | | | | |
money and those who want to borrow.
| | | | | | |
Role of Banks - answer Acts as a financial
| | | | || | | |
intermediary between savers and borrowers,
| | | | |
which results in efficient use of pooled resources.
| | | | | | | |
Facilitates the creation of money by expanding the
| | | | | | |
supply of money through deposit and loan
| | | | | | |
transactions.
|
Creates financial products and services that
| | | | |
benefits its customers.
| | |
,Develops mechanisms for transferring money and
| | | | |
making payments.
| | |
Contributes to the development of the economy | | | | | |
Investment Banking: what are Debt Capital | | | | |
Markets? - answer Large Company or Government
| | | || | | |
wants to raise capital by issuing bonds
| | | | | | |
An investment bank would be involved in planning
| | | | | | |
the bond issuance, working with the issuer to
| | | | | | | |
manage the documentation required to issue the
| | | | | | |
bonds, and help sell the bonds.
| | | | | |
The investment bank would buy the securities at
| | | | | | |
one price and then add on a markup in the sale
| | | | | | | | | | |
price and thereby generate a profit that
| | | | | | |
compensates for the risk they take on. This
| | | | | | | |
difference is the underwriting spread. A lead bank
| | | | | | | |
will normally work with a group of investment
| | | | | | | |
banks, called a syndicate, to underwrite an issue so
| | | | | | | | |
that the risk is spread among others.
| | | | | | |
Investment Banking: A group of investment banks | | | | | |
is called? - answer Syndicate - A lead bank will
| | | | || | | | | |
,| normally work with a group of investment banks, | | | | | | |
| called a syndicate, to underwrite an issue so that
| | | | | | | |
| the risk is spread among others.
| | | | |
Investment Banking: What is underwritten | | | |
spread? - answer The investment bank would buy
| | | || | | | |
the securities at one price and then add on a mark-
| | | | | | | | | | |
up in the sale price and thereby generate a profit
| | | | | | | | |
that compensates for the risk they take on. This
| | | | | | | | |
difference is the underwriting spread.
| | | | |
Investment Banking: What is Equity capital | | | | |
markets? - answer Where a company needs more
| | | || | | | |
money to grow and decides to raise the funds by
| | | | | | | | | |
undertaking an initial public offering (IPO).
| | | | | |
Whereby it sells its shares to the public and a wider
| | | | | | | | | | |
pool of
| |
investors for the first time. The investment bank | | | | | | |
will put together a prospectus explaining the
| | | | | | |
terms of the offering and the risks it carries,
| | | | | | | | |
managing the issuance process and helping the
| | | | | | |
price of the offering.
| | | |
Investment Banking: Private placements - answer | | | | | |
Where customers plan an offering of bonds with an
| | | | | | | | |
institutional investor such as an insurance
| | | | | |
, | company or a retirement fund. Often this can be a
| | | | | | | | |
| fast track option due to lower regulatory
| | | | | |
| requirements.
Investment Banking: Mergers and acquisitions - | | | | |
answer Where a company is looking to buy
| || | | | | | |
another company, investment banks offer advice
| | | | | |
on how the company should proceed with the
| | | | | | | |
acquisition, including the pricing of the offer.
| | | | | | |
Investment banks need to establish information | | | | |
barriers within the organizations to prevent
| | | | | |
exchanges or communication that could lead to
| | | | | | |
conflict of interest.
| | |
Accepting Deposits: Banks source their funds | | | | |
largely from deposits from the public? What are
| | | | | | | |
the 3 main types of public deposits - answer
| | | | | | | | | |
Savings deposits (from salary and wage earners)
| | | | | | |
Fixed term deposits (lump sum deposited for a
| | | | | | |
specific period) |
Current deposits (business accounts)
| | |
QUESTIONS WITH COMPLETE SOLUTIONS)
financial intermediation - answer The process of
| | | || | |
pooling funds from savers and using these to
| | | | | | | |
provide loans to borrowers. The bank acts as a go
| | | | | | | | | |
between or intermediary for those who have extra
| | | | | | | |
money and those who want to borrow.
| | | | | | |
Role of Banks - answer Acts as a financial
| | | | || | | |
intermediary between savers and borrowers,
| | | | |
which results in efficient use of pooled resources.
| | | | | | | |
Facilitates the creation of money by expanding the
| | | | | | |
supply of money through deposit and loan
| | | | | | |
transactions.
|
Creates financial products and services that
| | | | |
benefits its customers.
| | |
,Develops mechanisms for transferring money and
| | | | |
making payments.
| | |
Contributes to the development of the economy | | | | | |
Investment Banking: what are Debt Capital | | | | |
Markets? - answer Large Company or Government
| | | || | | |
wants to raise capital by issuing bonds
| | | | | | |
An investment bank would be involved in planning
| | | | | | |
the bond issuance, working with the issuer to
| | | | | | | |
manage the documentation required to issue the
| | | | | | |
bonds, and help sell the bonds.
| | | | | |
The investment bank would buy the securities at
| | | | | | |
one price and then add on a markup in the sale
| | | | | | | | | | |
price and thereby generate a profit that
| | | | | | |
compensates for the risk they take on. This
| | | | | | | |
difference is the underwriting spread. A lead bank
| | | | | | | |
will normally work with a group of investment
| | | | | | | |
banks, called a syndicate, to underwrite an issue so
| | | | | | | | |
that the risk is spread among others.
| | | | | | |
Investment Banking: A group of investment banks | | | | | |
is called? - answer Syndicate - A lead bank will
| | | | || | | | | |
,| normally work with a group of investment banks, | | | | | | |
| called a syndicate, to underwrite an issue so that
| | | | | | | |
| the risk is spread among others.
| | | | |
Investment Banking: What is underwritten | | | |
spread? - answer The investment bank would buy
| | | || | | | |
the securities at one price and then add on a mark-
| | | | | | | | | | |
up in the sale price and thereby generate a profit
| | | | | | | | |
that compensates for the risk they take on. This
| | | | | | | | |
difference is the underwriting spread.
| | | | |
Investment Banking: What is Equity capital | | | | |
markets? - answer Where a company needs more
| | | || | | | |
money to grow and decides to raise the funds by
| | | | | | | | | |
undertaking an initial public offering (IPO).
| | | | | |
Whereby it sells its shares to the public and a wider
| | | | | | | | | | |
pool of
| |
investors for the first time. The investment bank | | | | | | |
will put together a prospectus explaining the
| | | | | | |
terms of the offering and the risks it carries,
| | | | | | | | |
managing the issuance process and helping the
| | | | | | |
price of the offering.
| | | |
Investment Banking: Private placements - answer | | | | | |
Where customers plan an offering of bonds with an
| | | | | | | | |
institutional investor such as an insurance
| | | | | |
, | company or a retirement fund. Often this can be a
| | | | | | | | |
| fast track option due to lower regulatory
| | | | | |
| requirements.
Investment Banking: Mergers and acquisitions - | | | | |
answer Where a company is looking to buy
| || | | | | | |
another company, investment banks offer advice
| | | | | |
on how the company should proceed with the
| | | | | | | |
acquisition, including the pricing of the offer.
| | | | | | |
Investment banks need to establish information | | | | |
barriers within the organizations to prevent
| | | | | |
exchanges or communication that could lead to
| | | | | | |
conflict of interest.
| | |
Accepting Deposits: Banks source their funds | | | | |
largely from deposits from the public? What are
| | | | | | | |
the 3 main types of public deposits - answer
| | | | | | | | | |
Savings deposits (from salary and wage earners)
| | | | | | |
Fixed term deposits (lump sum deposited for a
| | | | | | |
specific period) |
Current deposits (business accounts)
| | |
