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Bonds 105: The Process of Issuing Bonds

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1.
Investment bankers serve as an intermediary between the organization issuing securities and the investors who purchase them.
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True. Investment bankers link a corporation or government unit to the capital marketplace.
2.
An underwriter for newly issued bonds profits through _______.
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An underwriting spread. The underwriter earns a profit, based on the difference between its purchase price and the selling price.
3.
The Securities and Exchange Commission requires bond issuers to register all newly issued bonds.
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False. Bonds sold through private placement do not need to be registered with the SEC.
4.
When investment bankers underwrite bonds, they assume the risks of buying and reselling the new securities.
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True. They assume the risks involved in marketing the new securities.
5.
An investment banker firm has just sold a newly issued bond through private placement. The purchaser of the bond was most likely _______.
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An insurance company. Investment bankers may sell newly issued bonds through private placements to institutional investors like insurance companies.