Question : Which of the following is a characteristic of the primary market?
Option 1: High liquidity
Option 2: Trading of existing securities
Option 3: Direct interaction between issuers and investors
Option 4: Continuous trading throughout the day
Correct Answer: Direct interaction between issuers and investors
Solution : The correct answer is (c) Direct interaction between issuers and investors.
A characteristic of the primary market is the direct interaction between issuers and investors. In the primary market, issuers, such as companies or governments, directly offer and sell new securities to investors. This direct interaction allows issuers to raise capital by selling their newly issued securities to investors without the involvement of intermediaries. In the primary market, issuers and investors negotiate the terms of the securities issuance, such as the price, quantity, and timing. Investors have the opportunity to directly participate in the initial offering of securities, often through processes like initial public offerings (IPOs) or bond issuances. This direct interaction allows investors to obtain securities directly from the issuer, often at the offering price.
Question : Which of the following is a characteristic of the secondary market?
Option 1: Issuing new securities
Option 4: Facilitating short-term borrowing and lending
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