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 IBM stock on the NYSE through your broker.
• B) IBM issues 2,000,000 shares of new stock and sells them to the
• Public through an investment banker.
• C) You buy 200 shares of IBM stock from your brother. The trade is not made through a broker--you just give him cash and he gives you
• The stock.
• D) One financial institution buys 200,000 shares of IBM 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 IBM shares on the NYSE.

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Definitions:

Common Stock Split

A division of a company's existing shares into multiple ones to boost the liquidity of the shares, making them more affordable to small investors without altering the shareholder's equity.

Return on Equity

A financial ratio calculated by dividing net income by shareholder equity, used to measure the profitability of a company in generating profit from its equity investments.

Debt-to-Equity Ratio

This ratio measures the mix of shareholders' equity to debt in financing a company's assets.