Question

Which of the following statements is TRUE?A. All secondary markets are dealer markets.B. All secondary markets are broker markets.C. All stock trades between existing shareholders are secondary market transactions.D. All stock transactions are secondary market transactions.

Answer 1

The true statement is that all stock trades between existing shareholders are secondary market transactions because secondary markets are where existing securities are traded among investors.

Step-by-step explanation:

The correct statement among the options provided is C. All stock trades between existing shareholders are secondary market transactions. Secondary markets are where existing securities, such as stocks and bonds, are bought and sold among investors or traders. These markets provide liquidity, allowing investors to easily sell securities. Secondary markets exist in various forms, with some being dealer markets, where dealers buy and sell securities from their own inventory, and others being broker markets, where brokers facilitate trades between buyers and sellers. Not all secondary markets are strictly dealer markets or broker markets, so statements A and B are false. Statement D is also false because not all stock transactions occur in the secondary market; initial public offerings (IPOs), for example, are part of the primary market.

Answer 2

The correct answer is option C.

Step-by-step explanation:

A secondary market is a market where investors buy and sell securities that they already own. Though the most commonly traded security in the secondary market is stock, other types of assets are traded as well.

Stocks are initially issued in the primary market as initial public offering or IPO. The existing stocks are then bought and sold in the secondary market. So not all stock transactions are secondary market transactions, only the existing are.