Question

Which of the following statements is true about secondary markets?

A. A buyer may incur search costs and find a seller on their own through a direct search.
B. A broker may bring buyers and sellers together, charging a commission.
C. A dealer may sell and buy securities using his inventory, therefore reducing search costs. The dealer's return is the bid-ask spread.
D. An auction market allocates the selling shares to the highest bidder.

Answer 1

True statement about secondary markets is:

B. A broker may bring buyers and sellers together, charging a commission.

Step-by-step explanation:

In a typical secondary market, investors buy and sell outstanding shares among themselves. Acting as an intermediary between the stock exchange and the investor, a broker arranges the buying and selling of shares among investors, charging a commission for their work. They facilitate the sale and purchase of shares in the secondary market.