Question : Statement 1: A primary dealer assists in the distribution of government securities.
Statement 2: Primary dealers are primarily involved in the secondary market trading of securities.
Option 1: Statement 1 is true, and statement 2 is true.
Option 2: Statement 1 is true, but statement 2 is false.
Option 3: Statement 1 is false, and statement 2 is true.
Option 4: Statement 1 is false, and statement 2 is false.
Correct Answer: Statement 1 is true, and statement 2 is true.
Solution : The correct answer is (a) Statement 1 is true, and statement 2 is true.
Statement 1 is true. Primary dealers assist in the distribution of government securities by buying them directly from the central bank and then selling them to other investors, such as banks, mutual funds, and insurance companies. This helps to make government securities more accessible to a wider range of investors.
Statement 2 is true. Primary dealers are also actively involved in the secondary market trading of securities. They buy and sell government securities from other investors on a daily basis. This helps to provide liquidity to the market and makes it easier for investors to buy and sell government securities.
Primary dealers play an important role in the government securities market by helping to ensure that it is efficient and liquid. This benefits all stakeholders, including the government, investors, and businesses.
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