Which best describes an investment bank's core function?

• A. Accepts deposits insured by the government.
• B. Trades in government bonds exclusively.
• C. Trades in financial assets and is not covered by deposit insurance.
• D. Oversees the overall monetary policy.

Answer: (C)

Investment banks operate in the capital markets, helping clients raise money and trade securities, and they provide advisory services for transactions like mergers and acquisitions. The defining point is that they engage in trading and underwriting financial assets rather than taking customer deposits. Because their business isn’t based on insured deposits, they aren’t covered by government deposit insurance. This combination—trading and dealing in a broad range of financial assets without deposit insurance—fits best. They do not focus exclusively on government bonds (their activities span many asset types), and monetary policy is the realm of a central bank, not an investment bank.