Question

Dalrymple Bay Coal Terminal, a coal-handling facility and export terminal in Queensland, Australia, has issued triple-A rated bonds for $680 million in Australian dollars. The bonds will be used to refinance existing bank debt caused by the acquisition of eases from the Queensland government in 2002. The Commonwealth Bank of Australia acted as investment bankers to the transaction. This means the Commonwealth Bank of Australia:

Answer 1

Answer: B. Bought the bonds from Dalrymple and sold them to the public

Explanation:

Investment Banks help companies issuing new securities in diverse ways to ensure that they raise the capital they are looking for. Some of the ways they help include; underwriting securities and market research. The main way they help companies issuing new securities however, is underwriting.

With Underwriting, the Investment Bank usually buys all the securities on offer from the Issuing company, then sells them at higher price to make a profit. This helps the issuing company because they get to sell all or most of their securities so it reduces uncertainty.

The Commonwealth Bank of Australia therefore bought the bonds from Dalrymple and sold them to the public.