Investment Banking - Intro

Question 1

4 main areas of investment banking

Answer 1

a) Capital Market b) Advisory c) Trading & Brokerage d) Asset Management

Question 2

What are the Critical Factors in investment banking

Answer 2

a) Government Regulations & Market Dynamics

Question 3

Name the largest investment banks in the world

Answer 3

Barclays, Morgan Stanley, Goldman Sachs, Merrill Lynch, JP Morgan, Credit Suisse, CITI, Deutsche Bank

Question 4

What’s the main activity of investment bank

Answer 4

Security Underwriting. Investment banks bought bonds and stocks from the issuers and resold these securities to a group of investors

Question 5

How investment banks have emerged in America?

Answer 5

American economy was growing too fast, commercial banks couldn’t cope with the pace to expand railroads, mining & other heavy industries

Question 6

What are the main activities of a commercial bank

Answer 6

Deposit taking & Credit giving activities

Question 7

What’s a spread

Answer 7

the difference between the interest that the bank pays to a depositor and the interest that it pays to the borrower. Spread = Interest Income - Interest Expense

Question 8

What’s commerical banks main source of revenue

Answer 8

Interest income

Question 9

What’s a universal bank

Answer 9

banks that perform commercial and investment banking services

Question 10

What’s Glass-Steagall act and which year it was enacted

Answer 10

Glass-Steagall act prohibited commercial banks involvement in investment banking activities and it was enacted in 1933.

Question 11

Three main business units of Morgan Stanley

Answer 11

institutional securities, wealth management and investment management.

Question 12

What the investment banking products encompass of?

Answer 12

a) Trading b) Asset Management c) Underwriting Debt & Equity d) Advisory

Question 13

Two traditional activities that stand at the core of investment banking?

Answer 13

Underwriting Debt & Equity And Advisory

Question 14

What’s the role of a Chinese wall?

Answer 14

The role of a Chinese wall is to create a barrier between different divisions (for example between Research and Underwriting) whose interactions will create a conflict of interest.

Question 15

What is Capital Markets service also called?

Answer 15

Underwriting Services

Question 16

What is Advisory service also called?

Answer 16

M&A and Restructuring

Question 17

What’s ECM

Answer 17

Equity Capital Markets

Question 18

What’s DCM

Answer 18

Debt Capital Markets

Question 19

What’s founder’s interest?

Answer 19

The founders of a company want to sell at the right time and monetize their hard work.

Question 20

What are investors looking for?

Answer 20

Investors are looking to invest in a company that has great management and great potential.

Question 21

What’s investment bankers role in the IPO process

Answer 21

a) Provide Guidance b) IPO preparations c) Deal with investors d) Arrange meeting with Company’s management and Investors e) Stabilize the stock price

Question 22

Selling additional equity share is called?

Answer 22

SEO - Seasoned Equity Offerings

Question 23

What’s an acquisition?

Answer 23

When a company buys another company’s shares or assets.

Question 24

Bidders and Sellers

Answer 24

Buyers and Sellers

Question 25

M&A logic

Answer 25

the amount of money that the bidder wants to pay and the amount of money that the seller is asking

Question 26

When is restructuring necessary?

Answer 26

Restructuring is necessary when the firm cannot service its debts and in danger of going bankrupt.

Question 27

When the company is in need of restructuring, what are its alternatives?

Answer 27

A private workout or a bankruptcy procedure in the court

Question 28

What's the golden goose of investment banking?

Answer 28

Trading & Brokerage

Question 29

What is trading & brokerage consists of?

Answer 29

Trading & Brokerage consists of buying and selling securities by using investment bank's own money (proprietary trading) or buying securities on behalf of its clients (brokerage)

Question 30

How much revenue does the trading & brokerage activity contribute in an investment bank?

Answer 30

It contributes about 30-50% of revenue

Question 31

What's market making?

Answer 31

Investment banks play a very important role in the liquidity of financial markets. Market making consists of buying of securities and being ready to sell these securities when the customer place an order

Question 32

What are the financial instruments do the investment banks trade?

Answer 32

Equity and fixed income instruments and derivative financial instruments (speculative reasons)

Question 33

Examples of derivative instruments?

Answer 33

Forwards, Futures, Options & Swaps

Question 34

What's is an Asset Manager's business?

Answer 34

Asset Managers are in the business of using money to make more money.

Question 35

What's an Asset Management?

Answer 35

Asset Management is about managing clients' investment and providing them with strategies and expertise that will help them achieve their financial goals.

Question 36

What is the spectrum of asset classes?

Answer 36

Stocks, Bonds, Commodities, Real Estate, Private Equity,

Question 37

What does an asset manager do?

Answer 37

high quality advice and superior risk return investments

Question 38

Different categories of stock?

Answer 38

Small Cap, Mid Cap, Large Cap, Blue Chip, Dividend Stocks, Stocks from growth region like BRIC countries

Question 39

Different categories of bond?

Answer 39

Short maturity, long maturity, Government, Corporate

Question 40

What are the other asset management categories

Answer 40

Commodities and Real Estate

Question 41

What are alternative investments for asset management?

Answer 41

Private equity or hedge funds

Question 42

What are the roles in asset management?

Answer 42

Sales force, Portfolio Manager and Research Department

Question 43

Who makes the investment decision and portfolio allocation?

Answer 43

Portfolio manager who takes the help of Research department to make investment decisions.

Question 44

What are the 5 largest funds in terms of AUM - assets under management?

Answer 44

Blackrock, Vanguard group, UBS, State Street and Fidelity