FRM Part I · FRM Exam Part I · Banks
A universal bank is evaluating which of its activities would typically be classified as investment banking rather than commercial banking. Which of the following is an investment banking activity?
Underwriting a corporate bond issue is an investment banking activity because the bank helps raise capital in the securities markets and distributes the securities to investors. Taking deposits and making loans, including credit lines and mortgages, are core commercial banking functions.
- AUnderwriting a new bond issue for a corporate clientCorrect
- BAccepting demand deposits from retail customers
- CMaking a revolving credit line available to a small business
- DIssuing mortgages to households and holding them to maturity
Explanation
Investment banking covers underwriting securities issuance, advisory on mergers and trading. Deposit-taking and lending, including mortgages and credit lines, are commercial banking functions.
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