Meta issues 15-year convertible bonds to finance its Reality Labs project. Which of the following best describes the types of market transactions involved in this case?

Question

BlackTom AI · Accepted Answer

First, let's restate what the question is asking: it asks to identify the types of market transactions involved when a company issues 15-year convertible bonds to finance a project. The key concepts are the nature of the instrument (convertible bonds are long-term debt/equity-linked securities) and the stage of trading (primary market where new issues are sold to investors, versus secondary market where existing securities trade). 
Option a: 'Capital market transaction and secondary market transaction' would imply that the issuance is a capital-market activity but that the trading occurs in the secondary market. While convertible bonds are indeed capital-market instruments due to their long-term nature, the act of issuing the bonds themselves happens in the primary market, not secondary. The statement mixes the instrument category with the trading stage in a way that mislabels the initial issuance. 
Option b: 'Money market transaction and primary market transaction' would categorize the instrument as a money market item. Money markets cover short-term, highly liquid debt (generally under one year). A 15-year convertible bond is a long-term instrument, so describing the issuance as a money market transaction is inaccurate. 
Option c: 'Capital market transaction and primary market transaction' correctly aligns with the facts: a 15-year convertible bond is a long-term security (capital market), and its issuance to investors occurs in the primary market. This pairing reflects both the long-term nature of the instrument and the initial sale of securities to raise new capital. 
Option d: 'Money market transaction and secondary market transaction' incorrectly characterizes both dimensions: money market instruments are short-term, and secondary market activity refers to trading existing securities rather than issuing new ones. Since the scenario involves an issuance of new convertible bonds, this option is flawed on both counts. 
In summary, the correct framing is that the event constitutes a capital market transaction (due to the long-term nature of the instrument) and a primary market transaction (due to the issuance of new securities to investors). The other choices fail by misclassifying the instrument’s time horizon or the market stage, leading to inaccurate descriptions of the transaction type.

Meta issues 15-year convertible bonds to finance its Reality Labs project. Which of the following best describes the types of market transactions involved in this case?

View Explanation

Log in for full answers

Similar Questions

Why don’t small businesses make greater use of the direct credit markets?

Regarding financial markets, select the correct alternative:

Which of the following transactions takes place in both the secondary market and capital market?

Which of the following statements is CORRECT?

The problem with newer capital markets is that they rely less on fundamentals and research. True or False?

The newer capital markets are better because they are accessible to all. True or False?

Capital Markets refers to financial resources funded by investments. True or False?

Which of the following statements is CORRECT?

More Practical Tools for Students Powered by AI Study Helper

Homework AI Solver

Stylized AI Paper Writer

Plagiarism Checker Assistant

Citation AI Academic Writing Tool

In-Class Translation Assistant

AI Note Generator

AI Quiz Answers

Past Exam Questions from University Test Bank

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler