Without a secondary market, issuers would be unable to ________, or they would have to pay a higher rate of return, as investors would ________ in compensation for expected illiquidity in the securities.

Question

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Without a secondary market, issuers would be unable to sell new securities easily, and as a result, they would have to pay a higher rate of return or interest rate to compensate investors for expected illiquidity in the securities. This is because investors may not be able to sell their securities quickly in case of a need for cash or for other reasons. This increased cost of capital, or discount rate, would result in higher costs for issuers, making it more difficult for them to obtain financing. Therefore, the presence of a secondary market can lower the cost of capital for issuers by providing liquidity to investors and enhancing the tradability of securities.

Without a Secondary Market, Issuers Would Be Unable to ________