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.

Question

Quizplus · Accepted Answer

A primary market transaction involves the issuing of new securities by a company or government entity to raise capital, and selling those securities to investors. Option B describes Johnson & Johnson issuing new shares and selling them to the public through an investment banker, making it a primary market transaction. The other options involve buying and selling existing shares on the secondary market, which is not a primary market transaction.

Which of the Following Is a Primary Market Transaction