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How do investment banks make money themselves issuing bonds for companies?


How do investment banks make money themselves issuing bonds for companies?

Actually its pretty easy:
Making it a lot simpler then it is here goes:
So a company wants to issue $1 Million in bonds and hire's an investment bank to sell them (usually the number is MUCH higher)
The investment bank in the hireing phase agrees with the company to take a percentage of the funds as a commision. Lets say 10%
Which means that the company will be issuing 1000 bonds at $1000.00 each. However they will only get $900.00 for each bond and the investment bank gets to keep $100.00 per bond.
At the end of the sale the Investment Bank has $100,000.00 as their commision and the Company issuing the bonds gets $900,000.00

The cool part is that though there is a lot of paperwork and legal mumbo jumbo most bond issues are completely sold out prior to actually coming to market. So if the above issue was a real the investment bank would have made $100,000 in a matter of months free and clear!!

Interest

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  Business Investment   Business financing   Business Invest   Business Debt   Bond Investment   Angel Funds   Alternative Investment
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