Review Questions

1. (LO 11.1) Why do corporations employ investment bankers?

2. (LO 11.1) Identify the primary market functions of investment bankers.

3. (LO 11.1) Discuss how investment bankers assume risk in the process of marketing securities of corporations. How do investment bankers try to minimize these risks?

4. (LO 11.1) Explain market stabilization.

5. (LO 11.2) What were some of the reasons for the decline in Facebook’s stock price after its IPO?

6. (LO 11.3) Briefly describe the process of competitive bidding and discuss its relative advantages and disadvantages.

7. (LO 11.4) Identify the costs associated with going public.

8. (LO 11.5) Briefly describe how investment banking is regulated.

9. (LO 11.5) Describe the inroads into investment banking being made by commercial banks.

10. (LO 11.6) What are some of the characteristics of an organized securities exchange?