Question

Which of the following is a primary market transaction?

Group of answer choices

a. Johnson & Johnson issues 2,000,000 shares of new stock and sells them to the public through an investment banker.

b. You sell 200 shares of Johnson & Johnson stock on the NYSE through your broker.

c. You buy 200 shares of Johnson & Johnson stock from your younger brother. You just give him cash and he gives you the stock

d. the trade is not made through a broker. You invest $10,000 in a mutual fund, which then uses the money to buy $10,000 of Johnson & Johnson shares on the NYSE.

Answer 1

Correct Answer-(a)Johnson & Johnson issues 2,000,000 shares of new stock and sells them to the public through an investment banker.

Reason-

Primary market is the market wehre the issues issues new Stock to the public, for the first time. Primary market market is the market for the issuer to issue funds to the public by issuing new stocks.Example for primary market transactions is IPO or Initial price Offerings.

Secondary market is the market where the stoocks aloreday issued in the primary market are traded.It is a maret for the investors.

Johnson & Johnson issues 2,000,000 shares of new stock and sells them to the public through an investment banker-it is a primary market transaction as new stock are issued to the public by the issuer.

Transactions mentioned in the option (b),(c) and (d) are secondary market transaction.