Given below are two statements:
Statement I: In the secondary market, there is sale of securities by new companies to investors.
Statement II: The secondary market helps existing investors to disinvest and fresh investors to enter the market.
In the light of the above statements, choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Statement I is incorrect but Statement II is correct.
Statement I: In the secondary market, there is sale of securities by new companies to investors. — Incorrect. Sale of securities by new companies takes place in the primary market. The secondary market deals only in existing securities.
Statement II: The secondary market helps existing investors to disinvest and fresh investors to enter the market. — Correct. The secondary market is the market for the purchase and sale of existing securities. A present investor can sell and take his money out, and a new investor can buy and come in.
NCERT (Pre-rationalised Edition): “SECONDARY MARKET The secondary market is also known as the stock market or stock exchange. It is a market for the purchase and sale of existing securities. It helps existing investors to disinvest and fresh investors to enter the market. It also provides liquidity and marketability to existing securities. …”
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