A corporation raises new funds in the financial system when its securities are issued in the _________. A.primary and secondary bond marketB.secondary share marketC.primary share marketD.secondary bond market
Question
A corporation raises new funds in the financial system when its securities are issued in the _________. A.primary and secondary bond marketB.secondary share marketC.primary share marketD.secondary bond market
Solution
The correct answer is C. primary share market.
Here's why:
A corporation raises new funds when it issues securities in the primary market. This is the part of the capital market that deals with the issuance of new securities. Companies, governments, or public sector institutions can obtain funding through the sale of a new stock or bond issue. This is typically done through a syndicate of securities dealers. The process of selling new issues to investors is called underwriting.
In the primary market, the transaction is directly between the company and the buyer (investor), and the proceeds of the sale go to the company that issued the stock or bond.
In contrast, the secondary market is where investors trade previously issued securities without the involvement of the issuing company. Therefore, it is not a venue for a company to raise new funds.
So, the corporation raises new funds in the primary share market, not in the secondary share market, primary and secondary bond market, or secondary bond market.
Similar Questions
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