Ravi buys 100 shares of Tara Ltd. from Meena through the stock exchan…

The correct answer is Option (3) → It is a secondary market deal, as ownership of existing shares passes between investors.

Option (1) It is a primary market deal, as Ravi is buying these shares for the first time. — Incorrect. Buying a share for the first time does not make the deal primary. Ravi buys existing shares from another investor, Meena.

Option (2) It is a primary market deal, as the shares are sold through an intermediary. — Incorrect. A sale through an intermediary is primary only when the company itself sells new securities. Here the seller is Meena, an investor.

Option (3) It is a secondary market deal, as ownership of existing shares passes between investors. — Correct. In the secondary market, ownership of existing securities passes between investors, and the company is not involved. Meena sells and Ravi buys through the stock exchange.

Option (4) It is a secondary market deal, as it directly promotes capital formation. — Incorrect. The market is right, but the reason is wrong. The secondary market promotes capital formation only indirectly, by making shares easy to encash.