Question : Which of the following is a characteristic of the secondary market?
Option 1: Issuing new securities
Option 2: Trading of existing securities
Option 3: Direct interaction between issuers and investors
Option 4: Facilitating short-term borrowing and lending
Correct Answer: Trading of existing securities
Solution : The correct answer is (b) Trading of existing securities.
A characteristic of the secondary market is the trading of existing securities. The secondary market is where investors can buy and sell securities that have already been issued in the primary market. It provides a platform for the exchange of ownership of securities between buyers and sellers.In the secondary market, investors can trade existing stocks, bonds, derivatives, and other financial instruments. The transactions take place on stock exchanges or other organized trading platforms, where buyers and sellers come together to execute trades.The secondary market offers liquidity to investors by providing an opportunity to convert their investments into cash. Investors can sell their securities to other market participants based on prevailing market prices. The prices in the secondary market are determined by supply and demand dynamics, investor sentiment, and other market factors.
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