ECONOMICS
FINANCIAL MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Primary market
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Secondary market
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Both (a) and (b)
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None of the above
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Detailed explanation-1: -Primary market directly contributes to the capital market.
Detailed explanation-2: -Primary market directly contributes in capital formation because in primary market company goes directly to investors and utilize the funds for investment purpose. Primary market does not include finance in the form of loan from financial institutions.
Detailed explanation-3: -In the primary market the flow of funds is from savers to investors that directly promotes capital formation. At the same time secondary market enhances the marketability of securities and thereby provides liquidity to investments. It indirectly promotes capital formation.
Detailed explanation-4: -The main function of the primary market is capital formation for the likes of companies, governments, institutions etc. It helps investors invest their savings and extra funds in companies starting new projects or enterprises looking to expand their companies.