What characterizes an investment bank?

• A. A bank that trades in financial assets and is not covered by deposit insurance.
• B. A bank that accepts deposits insured by the government.
• C. A bank that only lends to individuals.
• D. A central bank.

Answer: (B)

Investment banks are defined by their work in capital markets and advisory services for corporations and institutional clients, not by taking deposits from the public. They underwrite stock and bond issues, help companies raise capital, provide mergers and acquisitions advice, and trade and market‑make in securities. Because this is the core focus, they typically do not hold government‑insured deposits like a commercial bank would. The description that mentions deposits insured by the government describes a commercial bank, not an investment bank. The other options point to retail lending to individuals or to a central bank, which are different kinds of institutions.