Which of the following is an example of both a capital market and a secondary market transaction?

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BlackTom AI · Accepted Answer

Breakdown of what each option represents helps illuminate why one option is considered to illustrate both a capital market and a secondary market transaction.
Option a: 'Target Australia sold commercial paper with a face value of $500,000 to the Vic Super. It was initially issued by Toyota Finance Australia Limited.' This is a sale in the money/short-term debt market (commercial paper) and occurs in the primary market when issuers raise funds, not a secondary market trade of existing securities. Since it represents a new issue by the issuer, it does not depict a transfer of existing securities between investors in the secondary market.
Option b: 'CSL limited issued 100,000 bonds to raise funds for building another factory.' This is a new bond issuance, which is a primary market activity in the capital markets. It involves creating and selling new debt instruments rather than trading existing ones on a market. It does not capture the secondary market aspect where securities are bought/sold among investors after issuance.
Option c: 'CGU Insurance successfully purchased a $500 million treasury note as a registered bidder during issuance.' This describes participation in the issuance process (primary market) rather than trading on an existing market. It indicates the initial sale of new securities rather than a subsequent transfer between buyers and sellers in the market.
Option d: 'Jack, an investor, sold his 1000 ordinary shares of CBA on the ASX.' This reflects a trading of existing securities on a recognized exchange (ASX), which is characteristic of a secondary market transaction. At the same time, ordinary shares are equity instruments that belong to the capital market context, since they represent long-term investment capital. Therefore, this option simultaneously involves the capital markets (equity) and a secondary market transfer (sale of existing shares).
In summary, options a, b, and c depict primary market activities (new issuances in debt or equity markets), or a money/short-term market transaction, which do not satisfy both aspects. Option d uniquely depicts the transfer of an existing capital-market instrument (shares) on a secondary market, aligning with both concepts.

Which of the following is an example of both a capital market and a secondary market transaction?

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