Question

Which of the following is a primary market transaction?

a. IBM issues 2,000,000 shares of new stock and sells them to the public through an investment banker.
b. IBM sells 2,000,000 shares of treasury stock to its employees when they exercise options that were granted in prior years.
c. You sell 200 shares of IBM stock on the NYSE through your broker.
d. 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.
e. One financial institution buys 200,000 shares of IBM stock from another institution. An investment banker arranges the transaction.

Answer 1

Answer:

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

Explanation:

Basically, there are two market i.e primary market and the secondary market.  

In the primary market, the shares of new stock are sold to the public at large for the first time or we can say it is an initial public offer.  

And, in the secondary market, the buying and selling of stocks is done with themselves without direct transaction with the company and investors

In the given options, option A is the most appropriate option among them as the new stock is selling to the public by involving the investment banker.