Questions: Multiple Select Question Select all that apply Which of the following are defining features of the primary market? It is the market where initial public offerings are made. It only involves seasoned equity offerings. Proceeds from the sale of securities go to the issuing firm. It is the market where shareholders and bondholders buy and sell to each other.

Multiple Select Question Select all that apply Which of the following are defining features of the primary market? It is the market where initial public offerings are made. It only involves seasoned equity offerings. Proceeds from the sale of securities go to the issuing firm. It is the market where shareholders and bondholders buy and sell to each other.
Transcript text: Multiple Select Question Select all that apply Which of the following are defining features of the primary market? It is the market where initial public offerings are made. It only involves seasoned equity offerings. Proceeds from the sale of securities go to the issuing firm. It is the market where shareholders and bondholders buy and sell to each other.
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Solution

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Answer

The answers are:

  • It is the market where initial public offerings are made.
  • Proceeds from the sale of securities go to the issuing firm.
Explanation
Option 1: It is the market where initial public offerings are made.

This is correct. The primary market is where new securities are issued and sold for the first time. Initial Public Offerings (IPOs) are a key feature of the primary market, as they represent the first sale of stock by a private company to the public.

Option 2: It only involves seasoned equity offerings.

This is incorrect. While seasoned equity offerings (SEOs) can occur in the primary market, the primary market is not limited to them. SEOs involve the issuance of additional shares by a company that is already publicly traded, but the primary market also includes IPOs and other new securities offerings.

Option 3: Proceeds from the sale of securities go to the issuing firm.

This is correct. In the primary market, the proceeds from the sale of securities go directly to the issuing company or entity. This is a defining feature, as it allows the issuer to raise capital for various purposes, such as expansion or debt repayment.

Option 4: It is the market where shareholders and bondholders buy and sell to each other.

This is incorrect. This describes the secondary market, not the primary market. In the secondary market, existing securities are bought and sold among investors, and the issuing company does not receive any proceeds from these transactions.

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