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Which market allows for the purchase and sale of existing securities like shares and debentures?
- a)Primary market.
- b)Tertiary market.
- c)Secondary market.
- d)New issue market.
Correct answer is option 'C'. Can you explain this answer?
Verified Answer
Which market allows for the purchase and sale of existing securities l...
The secondary market is where existing securities like shares and debentures are purchased and sold. It provides a platform for investors to trade these securities, offering liquidity and allowing for price discovery based on market demand and supply.
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Which market allows for the purchase and sale of existing securities l...
Secondary Market:
The secondary market allows for the purchase and sale of existing securities like shares and debentures. Here's an explanation of why the correct answer is option 'C':
Definition:
The secondary market is where investors buy and sell securities they already own. It provides a platform for trading of existing securities among investors.
Key Features:
1. Liquidity: It offers liquidity to investors by providing a ready market for buying and selling securities.
2. Price Determination: Prices of securities are determined by market forces of demand and supply in the secondary market.
3. Regulation: The secondary market is regulated by stock exchanges and regulatory authorities to ensure fair and transparent trading practices.
4. Accessibility: It allows investors to trade securities easily through brokerage firms and online trading platforms.
Types of Transactions:
1. Equity Trading: Involves buying and selling of shares in publicly listed companies.
2. Debt Trading: Involves buying and selling of debentures, bonds, and other fixed-income securities.
3. Derivatives Trading: Involves trading of financial instruments like futures and options based on underlying securities.
Importance:
1. Price Discovery: Secondary market transactions help in determining the fair market value of securities.
2. Capital Formation: It provides an avenue for companies to raise capital by issuing shares to the public.
3. Risk Management: Investors can hedge their risks by trading in the secondary market.
In conclusion, the secondary market plays a crucial role in the financial system by facilitating the trading of existing securities and ensuring liquidity for investors.
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Which market allows for the purchase and sale of existing securities like shares and debentures?a)Primary market.b)Tertiary market.c)Secondary market.d)New issue market.Correct answer is option 'C'. Can you explain this answer?
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