? Which of the Following Is a Primary Market Transaction

question 34

Multiple Choice

? Which of the following is a primary market transaction?

• A) ?You sell 200 shares of Johnson & Johnson stock on the NYSE through your broker.
• B) ?Johnson & Johnson issues 2,000,000 shares of new stock and sells them to the public through an investment banker.
• C) ?You buy 200 shares of Johnson & Johnson stock from your younger brother.You just give him cash and he gives you the stock-the trade is not made through a broker.
• D) ?One financial institution buys 200,000 shares of Johnson & Johnson stock from another institution.An investment banker arranges the transaction.
• E) ?You invest $10,000 in a mutual fund, which then uses the money to buy $10,000 of Johnson & Johnson shares on the NYSE.

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Definitions:

Upper Bound

The maximum limit or highest achievable level of a particular measurement.

Call Option

A contractual arrangement providing the holder with the privilege, yet not the compulsion, to acquire an asset such as a stock, bond, or commodity, at a predetermined price during a defined period.

Interest Rate

An interest rate is the percentage of principal charged by the lender for the use of its money, or the rate earned on deposited funds.

Futures Contracts

Legally binding arrangements to engage in the buying or selling of a designated financial asset or commodity at a price established in advance, to be executed at a designated future time.