商务英语阅读(二版) 王关富 Unit10 banking 课后答案.doc

Chapter 10 The Alchemists of Finance Exercises 1. Questions on the text What’s the main difference between commercial banks and investment banks? In todays business environment, the main business of commercial banks is to collect deposits and make loans, while that of investment banks is to underwrite stocks and bonds and advise companies on mergers and acquisitions. Why do investment banks try to keep quiet about their big profits? Investment banks try to keep quiet about their big profits for two major reasons: first, they are under more scrutiny by regulators and investors; second, private equity and hedge funds have overtaken them in raising money and making excessive bets. What changes have taken place in the financial markets since the 1980s? The main changes since 1980s have been the rapid growth of financial instruments with unprecedented breadth, depth and richness, brought out by technology and innovation. Examples of those financial instruments are public and private debt securities and derivatives. Why do bankers and regulators worry about a possible collapse of an investment bank? They worry about a possible collapse of an investment bank because such an event will have serious implications for the whole financial system, and it is vital to know how such institutions evolve, how they handle risks and how well those risks are spread around the financial system. Which three factors can explain the huge profit for investment banks? Those factors are: first, the alchemists trick of turning debt (mostly leaden) into derivatives (mostly liquid); second, the emergence of a new class of leveraged client (hedge funds and private equity); third, seeking out new capital markets and clients around the world. Meanwhile, in all these pursuits the banks are now using their own money, to differing degrees. What does the expression “the wild east” refer to? That expression refers to the new markets emerging in Europe and Asia. The introduction of the euro in 1999 and