You recently sold 100 shares of microsoft stock to your brother at a family reunion. at the reunion your brother gave you a check for the stock and you gave your brother the stock certificates. which of the following best describes this transaction? a. this is an example of a derivative market transaction. b. this is an example of a money market transaction. c. this is an example of an exchange of physical assets. d. this is an example of a primary market transaction. e. this is an example of a direct transfer of capital.
A direct transfer refers to the shift of funds from certain form or section of a tax deferred retirement savings plan to another. Direct payments are not deemed to be statutory dividends, and are therefore not taxed as profits or susceptible to premature payment charges. Now normally this form of transition happens digitally.
In simple terms, cash loans exist when a company sells its shares in return for money specifically to the savers. There is no financial institution involved in this procedure. Small firms typically use direct transfers, so very less money is generated during this phase.
b. An IPO
The primary market transaction is the market where securities are created. An IPO which means initial public offer is an example of a primary market transaction.
The secondary market which is also known as the stock market is where securities that have been created are allowed to change ownership through sales and purchases.
All other options given (apart from IPO) are secondary market transactions.
(D) sale of 10,000 shares of treasury stock by its issuing corporation to Miquel.
Primary market transaction: In the primary market transaction, when securities are introduced in the business organization it is first given to the public or we can say initial public offer.
The business organization sell its securities in terms of stocks, bonds to the public for the first time
In the given question, the option D would be the most appropriate option and give an example of primary market transactions.
Thus, all other options are incorrect.
Based on the information provided within the question it can be said that the scenario in question is an example of a direct transfer of capital. This is when an asset that holds some kind of monetary value is transferred from one individual/account to another individual/account. Which is exactly what happened in this scenario as you and your brother exchanged one asset (stock) for another (check).
An example of primary market transaction occurs when there is a presence of creation of securities in which there is an initial public offering the occurs in a market n means for having to make the market to sell for the first time as it is associated or showed in the public.
C) Capital market instruments include both long-term debt and common stocks.
Capital market instruments include several types of financial instruments like stocks, bonds, US securities, foreign exchange, etc.
Since these financial instruments are basically debt and equity instruments, they are called securities. So another term used to refer to capital markets is the securities market. Capital markets are divided into two main classifications: primary markets where recently issued securities are traded, and secondary markets where investors trade previously acquired securities.
Corporate shareholders escape liability for the firm's debts, but this factor may be offset by the tax disadvantages of the corporate form of organization
D. Capital market instruments include both long-term debt and common stocks.
Capital market is financial market where long term instruments are traded. These instruments include bond, common stocks and debenture. With this background, statement in option D is correct.
Option A is not correct because reverse is the case: investment banks raise large blocks of capital from investors while commercial banks specialize in lending money.
Option B and E are not correct, too. Transaction under them are examples of a secondary market transaction.
Option C is wrong, as well. NYSE has a physical location where trading activities happen.
So option D is the only correct statement because capital market instruments are long-term debt and common stocks.
d. This is an example of a direct transfer of capital.
Direct transfer of stocks or securities refers a to situation whereby a seller of securities or stocks sell them to the buyer direct without involving any financial institution. Under this, seller will directly deliver the security certificate to the buyer who will in turn pay the seller in cash or by check immediately.
Therefore, collecting check from your brother for the Microsoft stock and giving your brother the stock certificate is an example of a direct transfer of capital.
e. As they are generally defined, money market transactions involve debt securities with maturities of less than one year.
Statement E, As they are generally defined, money market transactions involve debt securities with maturities of less than one year is true.
Statement A is not true. It is primary market transaction.
Statement B is not true. Individuals can also participate in derivatives market transactions.
Statement C is not true. The IPO market is a subset of the primary market.
Statement D is not true. It is a direct transfer of capital.