Capstone: Follow the Trade
Follow one investment from a company raising money, through the market, into a new investor's account, and check that you can explain every step.
What you'll do
You'll follow a fictional company, STU Corp, from its IPO to the moment a new investor's shares settle in her account. Along the way you'll calculate, match, put steps in order, and answer questions. At the end, you'll explain the whole journey in your own words. Your score appears as you go, and nothing is recorded outside this browser.
This capstone draws on
This capstone pulls together everything in Part 1. There's no time limit, and you can check each answer as you go. Every person, company, and number here is fictional.
Step 1: The company raises money
STU Corp, a growing business, decides to sell shares to the public for the first time. It sells 5 million new shares at $20 each.
How much money does STU Corp raise from the sale, before fees?
5,000,000 shares × $20 = $100,000,000. This is the only point in this capstone where STU Corp itself receives money from selling shares.
In which market did this sale take place?
A company selling newly created shares and receiving the money is the primary market. A first public sale like this is an IPO. Review: What a Financial Market Is.
Step 2: Who's involved
STU Corp's shares are now listed on an exchange, and investors can trade them. Several organizations play a part.
Match each description to the organization it describes.
- Requires STU Corp to disclose information to investors, but doesn't judge whether it's a good investment
- Receives your order and decides where to send it
- Matches buy and sell orders for listed shares
- Helps recover customers' missing assets if a member brokerage firm fails
- Stands ready to buy or sell STU Corp shares at quoted prices
- Oversees brokerage firms and the people who work for them
Review Exchanges, Buyers, and Sellers for brokers, exchanges, and market makers, and Who Regulates the Markets for the SEC, FINRA, and SIPC.
Step 3: A new investor opens an account
A year later, Lena, 26, decides to start investing. Her goal is retirement, about 40 years away. Her employer doesn't offer a retirement plan. She has an emergency fund, no high-interest debt, and has never borrowed money to invest.
Which setup is most consistent with what Part 1 covered?
Her goal is long-term retirement, which is what tax-advantaged retirement accounts are for, and a cash account avoids the extra risk of borrowing. Waiting has a cost too, as the Compounding lesson showed. This is a general example, not advice for any real person. Review: Taxable vs. Tax-Advantaged Accounts and Brokerage Accounts.
Step 4: Placing the order
Lena wants 40 shares of STU Corp. Her app shows a bid of $24.90 and an ask of $25.10.
If she places a market order to buy 40 shares, roughly how much will she pay, before any fees?
A market buy order generally fills at or near the ask: 40 × $25.10 = $1,004. Review: Bid, Ask, and the Spread.
Suppose instead she places a limit order to buy at $25.00, as a day order, and the ask stays at $25.10 all day. What happens?
A buy limit order fills only at the limit price or lower. If no seller accepts $25.00, it doesn't fill, and a day order cancels at the end of regular trading. Review: Order Types: Market, Limit, and Stop.
Step 5: The journey of the order
Lena goes with the market order.
Put these steps in the order they happen. Use the Up and Down buttons.
- The order is matched with a seller
- The trade settles, and the shares and cash officially change hands
- Lena places the order in her brokerage app
- Lena receives a trade confirmation
- Her broker decides where to send the order
Place, route, match, confirm, settle. Review: Exchanges, Buyers, and Sellers.
Lena's order fills on a Thursday that isn't a holiday. When does the trade settle?
Most US trades settle one business day after the trade date, a cycle called T+1.1 Thursday plus one business day is Friday. Review: Settlement, Fees, and Fractional Shares.
Where did Lena's $1,004 go?
This trade happened in the secondary market. STU Corp received money only once, at its IPO in Step 1.
Step 6: The cost of changing her mind
If Lena sold all 40 shares a minute later at the bid of $24.90, with no change in the quotes, how much would she lose to the spread?
She bought at $25.10 and would sell at $24.90: a $0.20 difference × 40 shares = $8. Small here, but it's a cost on every round trip, and much larger in thinly traded stocks.
Step 7: Keeping it safe
That evening, Lena gets a text: "Your brokerage account is locked. Verify your identity here: [link]." What should she do?
Messages that create urgency and include a link are a common way accounts are taken over. Going to the firm directly is safe either way. Review: Keeping Your Account Safe.
Step 8: Explain it in your own words
In four to six sentences, explain the full journey: how STU Corp got its money, what happened when Lena bought her shares, who was involved, and what does and doesn't protect her.
Compare with a model answer
STU Corp raised $100 million by selling new shares in an IPO, in the primary market. That was the only time the company received money from its shares. A year later, Lena opened a cash account and placed a market order for 40 shares. Her broker routed the order to a trading venue, where it was matched with a seller at about the ask, so her roughly $1,004 went to that seller, not to STU Corp. The trade settled one business day later.
The SEC requires STU Corp to disclose information but doesn't vouch for the investment. FINRA oversees Lena's brokerage firm. SIPC would help if the firm failed and her assets went missing. Nothing protects her from STU Corp's shares falling in value, which is the risk she accepts as an investor.
Your results
Notes and sources
- Investor.gov, U.S. Securities and Exchange Commission. New "T+1" Settlement Cycle: What Investors Need To Know. Checked 2026-09-26. Back to text