Which of the following statements is NOT correct?A.Companies in need of funds raise funds by issuing financial instruments in the primary market.B.A financial instrument has one issuer but possibly successive owners thanks to the secondary market.C.Owners of financial instruments can sell them in the secondary market and the buyer becomes the new investor in the financial instrument.D.Owners of financial instruments can sell them to other investors in the primary market.
Question
Which of the following statements is NOT correct?A.Companies in need of funds raise funds by issuing financial instruments in the primary market.B.A financial instrument has one issuer but possibly successive owners thanks to the secondary market.C.Owners of financial instruments can sell them in the secondary market and the buyer becomes the new investor in the financial instrument.D.Owners of financial instruments can sell them to other investors in the primary market.
Solution
The statement that is NOT correct is D. "Owners of financial instruments can sell them to other investors in the primary market."
The primary market is where securities are created. It's in this market that firms sell (issue) new stocks and bonds to the public for the first time.
The secondary market, on the other hand, is where investors buy and sell securities they already own. It is what most people typically think of as the "stock market".
So, owners of financial instruments cannot sell them to other investors in the primary market, they can only do so in the secondary market.
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