Which of the following statements is true about secondary markets?
A) In secondary markets, outstanding shares of stock are bought and sold among investors.
B) Most secondary market transactions directly affect the capital of the firm that issues the securities.
C) An active secondary market causes firms to sell their new debt or equity issues at a higher transaction cost of funds.
D) All of the above statements are true.

Question

Quizplus · Accepted Answer

Secondary markets are where previously issued securities, such as stocks and bonds, are bought and sold among investors. Therefore, statement A is true. Statement B is false as secondary market transactions directly affect the wealth of individual investors, not the capital of the issuing firm. Statement C is false as an active secondary market can actually lower transaction costs for firms issuing new securities.

Which of the Following Statements Is True About Secondary Markets