Market Classification Flashcards
What are the two main types of markets in capital market classification?
Primary Market and Secondary Market
True or False: The primary market is where securities are issued for the first time.
True
What is the primary function of the secondary market?
To facilitate the trading of existing securities.
Fill in the blank: In the primary market, companies raise capital by selling __________.
new securities
Which market involves the buying and selling of previously issued securities?
Secondary Market
What is an example of a primary market transaction?
An initial public offering (IPO)
True or False: Investors can buy shares directly from the company in the secondary market.
False
What role do underwriters play in the primary market?
They help issuers sell new securities to investors.
Which market is more liquid, primary or secondary?
Secondary Market
Fill in the blank: The __________ market is essential for price discovery of securities.
secondary
What is a significant feature of the primary market?
Securities are sold directly by the issuer.
True or False: The secondary market does not involve the original issuer of the securities.
True
What type of securities are typically traded in the primary market?
Newly issued stocks and bonds
What is the main source of funding for companies in the primary market?
Investor capital
What is a common method for companies to access the primary market?
Conducting an IPO
Fill in the blank: The __________ market allows for the resale of securities.
secondary
What is a key advantage of the secondary market for investors?
Increased liquidity
True or False: The secondary market is essential for the functioning of the primary market.
True
What is the role of the stock exchange in the secondary market?
To provide a platform for trading securities.
What does ‘capital market classification’ refer to?
The categorization of markets based on the nature of transactions.
What is the main goal of the primary market?
To raise new capital for issuers.
Fill in the blank: Investors in the __________ market can sell their securities to other investors.
secondary
What type of market is characterized by higher volatility, primary or secondary?
Secondary Market
What is an example of a secondary market transaction?
Buying shares of a company on a stock exchange.
True or False: The primary market includes both public and private offerings.
True
What happens to the proceeds from sales in the secondary market?
They go to the selling investors, not the issuing company.
What is the importance of market makers in the secondary market?
They provide liquidity by being ready to buy and sell securities.
