A person purchases stock XYZ (an Over The Counter stock) from a company who is also the market maker ...

By Investopedia Staff AAA
Q:
A person purchases stock XYZ (an Over The Counter stock) from a company who is also the market maker for XYZ. The price that the person would pay for the stock:

a) Does not include a markup
b) Includes the markup and commission
c) Includes the markup
d) Is discounted for the markup
e) None of these are true.

A:

The correct answer is c
When the firm is a market maker in the stock then it must act as a principle. Principal is the main party to a transaction, acting as either a buyer or seller for his/her own account and risk. Because the market maker must act as principal the person would only be charged a markup, not a commission.

Have a Financial Question?

RELATED FAQS

  1. Sometimes investment banking firms allocate shares of hot issues to the personal ...

    The correct answer is a) Spinning is the act of selling hot issues to the personal accounts of corporate officers which in ...
  2. Donald has been putting aside money for his retirement into a Roth IRA for six years.  Although ...

    The correct answer is A) In a Roth IRA, there is no required distribution date as there is in a traditional IRA.
  3. A 7-year, 6% coupon callable bond is currently trading at 96.25.  The ...

    Free info on financial certification exams including study guides, exam questions, and much more!
  4. According to SEC Release IA-1092, which of the following would NOT qualify as an ...

    The correct answer is C). SEC Release IA-1092 considers financial planners, pension consultants and sports and entertainment ...
RELATED TERMS
  1. Series 79

    A examination to ensure a candidate is qualified to become a ...
  2. Research Analyst

    A person who prepares investigative reports on equity securities. ...
  3. Series 34

    An exam required for individuals seeking to engage in off-exchange ...
  4. Financial Advisor

    One who provides financial advice or guidance to customers for ...
  5. Series 23

    An exam offered by the Financial Industry Regulatory Authority ...
  6. Series 28

    An exam given by the Financial Industry Regulatory Authority ...

You May Also Like

Related Articles
  1. Professionals

    Should You Add A Securities License ...

Trading Center