Final answer:
New securities are sold on the primary securities market, whereas existing securities are resold to the public on the secondary securities market.
Step-by-step explanation:
New securities are sold on the primary securities market, whereas existing securities are resold to the public on the secondary securities market. The primary market is crucial for companies issued for the first time through processes such as initial public offerings (IPOs), where investors purchase directly from the issuer. Meanwhile, the secondary market provides liquidity for these securities by allowing investors to sell their assets to other investors after the initial issuance.
Capital markets are a type of financial market where long-term loans such as corporate bonds, government bonds, or long-term certificates of deposit are involved, with a maturity of more than one year. Conversely, money markets deal with short-term loans with a period of less than one year. The liquidity and the possibility of resale in the secondary market are what differentiate primary and secondary markets, with stock exchanges being a prominent example of a secondary market where investors trade stocks and bonds.
Banks turning deposits into long-term loans, firms raising capital through bonds and stocks, and financial investors trading these securities are all activities linked to these markets. Investment mechanisms like mutual funds also play a role in combining multiple securities to provide diversified investment opportunities.