Chapter 15, Problem 1DQ

Summary Introduction

To explain: The reasons as to how an investment banker is a risk taker.

Introduction:

Investment Banker:

A person who works in a financial institution and is responsible for raising capital for governments, business entities, companies, etc. is an investment banker.

Answer to Problem 1DQ

An investment banker’s main job is to buy securities of businesses and sell them in the market. It involves a great risk as there is always a chance that the securities remain unsold and the investment banker bears the losses.

Explanation of Solution

Investment banking houses purchase stocks of a business at an agreed price and then sell them to individuals or security dealers at that price. The risk department of such institutions measures the risks involved in such transactions, since if such stocks remain unsold, they will have to bear losses.