Which ONE of the following statements is true about secondary markets?
A) In secondary markets, outstanding shares are bought and sold among investors.
B) For an investor, the function of secondary markets is to provide profitability for the shares of securities they own.
C) An active secondary market causes companies to sell their new debt or equity issues at a higher cost of funds.
D) All of the above are true statements

Question

Quizplus · Accepted Answer

A is the only statement that is true about secondary markets. Secondary markets involve the buying and selling of outstanding shares among investors, as opposed to the primary market where new securities are issued to the public. Statement B is incorrect, as the function of secondary markets is not necessarily to provide profitability for shareholders, but rather to facilitate the transfer of ownership of securities. Statement C is also incorrect, as an active secondary market can actually decrease the cost of funds for companies by increasing liquidity and competition among investors.

Which ONE of the Following Statements Is True About Secondary