Question : Case Study 26
ABC Ltd. is a manufacturing company that has decided to issue new shares in the market to raise funds for its expansion projects.
Question :
What type of market activity is ABC Ltd. engaged in by issuing new shares to the public?
Option 1: Secondary market trading
Option 2: Primary market issuance
Option 3: Mergers and acquisitions
Option 4: Currency swap
Correct Answer:
Primary market issuance
Solution : The correct answer is (b) Primary market issuance
The primary market is where new securities, such as stocks or bonds, are issued and sold for the first time by the issuing company directly to investors or the public. When ABC Ltd. issues new shares to raise funds for its expansion projects, it is conducting a primary market activity. On the other hand, the secondary market (option a) involves the trading of existing securities among investors.
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