Solution Manual for Investment Banks, Hedge Funds, and Private Equity, 3rd Edition

Preview (13 of 42 Pages)

100%

Purchase to unlock

Solution Manual for Investment Banks, Hedge Funds, and Private Equity, 3rd Edition - Page 1 preview image

Loading page ...

Questions & Answers:Chapter 1–Overview of Investment BankingQ1.What were the two main arguments for rejoining investment banks and retaildeposit-taking banks that led to the passing of the Gramm-Leach-Bliley Act?A.The first argument is that therejoining of the two banking businesses providesfor a more stable and countercyclical business model for these banks. Thesecond argument is to allow US banks to better compete with internationalcounterparts that were less encumbered by the Glass–Steagall Act.Q2.Describe the three principal businesses of an investment bank.A.The investment banking division arranges financing for governments andcorporations as well as advises on M&A transactions. The sales and tradingdivision sells and trades securities and other financial assets as an intermediaryon behalf of institutionalinvesting clients, and provides research to investingclients. The asset management division is responsible for managing money forindividual and institutional investing clients.Q3.Why might a universal bank be better able to compete against a pure-playinvestment bank for M&A and other investment banking engagements?A.Universal banks arebetterable to usetheir balance sheettolend moneytocorporations.Some companies prefer doing business with a bank that can bothprovide loans and investment banking products like M&A.Q4.Investment bank clients can be categorized into two broad groups of issuers andinvestors. These two groups often have competing objectives (issue equity at highestpossible price vs. acquire stock in companies at lowest possible price).Who withinthe investment bank is responsible for balancing these competing interests?A.ECM bankers are the intermediariesbetween these two parties and are chargedwith balancing the needs of each.Q5.What is a key consideration in determining thecost and otherparameters of acorporate debt offering and why is it important?A.Credit rating: impacts future cost of debt; also could trigger covenants in existingdebt.If lowered to below investment grade, certain institutional investors can nolonger invest in the company’sbonds orcommon stock.Q6.Why might an investment bank place higher priority on sell-side M&A engagementsover buy-side engagements?A.Completion-based fees: higher certainty of closing with sell-sides. In buy-sides,clientis up against other bidders andmay not win the bid.Q7.What is two key considerations for bankers in the debt capital markets divisionwhen working with an issuer on an offering?

Preview Mode

This document has 42 pages. Sign in to access the full document!

Report

Study Now!

Document Details

Related Documents

Texas Life and Health Insurance Exam 150 Questions

Understanding Obligation and Deobligation in Resou

Budgeting for Life After High School

Ch 4 les 1

Understanding Credit Reports Analyzing John's Fina

Financial Statement Analysis

CEO pay at John Deere and Caterpillar

Financial Planning and Budget Analysis

Financial Research Report

WACC Project Verizon Communication Inc

Company

Explore

Study Tools