What is a primary role of investment banks?

The primary role of investment banks is accurately reflected in the choice regarding purchasing large holdings of newly issued shares and reselling them. This function is part of the underwriting process, where investment banks help companies raise capital by facilitating the issuance of stocks or bonds. When a company goes public, investment banks purchase a significant amount of its initial shares (initial public offering, or IPO) and then sell these shares to institutional and retail investors, thus providing liquidity to the market and helping to set the stock price.

This process not only allows companies to access the capital needed for growth and development but also serves the needs of investors looking to buy shares in new companies. The investment bank's expertise ensures that the offering is properly priced and marketed to attract buyers. By facilitating these transactions, investment banks play a critical intermediary role in the financial markets, which is central to their operations.

The other options do not align with the primary functions of investment banks. Providing loans to individuals typically falls under the purview of commercial banks. Managing retail accounts for small investors is more characteristic of brokerage firms and wealth management services. Creating collateralized debt obligations is a more specialized activity typically undertaken by investment banks but is not as central to their primary role as underwriting and issuing new securities.