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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 marke

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 marke

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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 secondary market, investors trade previously-issued securities without the involvement of the issuing-companies. The secondary market is what people are referring to when they talk about the stock market. It is important to understand that the secondary market has no direct relationship with the corporation - the deal happens between investors.

Therefore, when a corporation wants to raise new funds, it goes to the primary market, not the secondary market. So, the answer is C. primary share market.

This problem has been solved

Similar Questions

13.Which function of the capital market involves the creation of a secondary market for existing securities?  A. Mobilization of savings  B. Price determination  C. Facilitating company growth  D. Risk mitigation

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.

If the company is issuing and trading new securities, such as stocks and bonds, which financial market is the company trading?a.Foreign exchange marketb.Money marketc.Derivatives marketd.Capital market

Primary market is also referred as_____a.bond marketb.issue marketc.capital marketd.none of the abov

Which of the following statements is TRUE?A.Secondary securities are securities that serve as collateral for primary securities. B.When an FI functions as a broker, they are selling a financial asset that they have created and will continue to hold on their balance sheet. C.Financial institutions are not subject to economies of scale in the collection of information. D.The asset transformation function of an FI is to issue primary financial claims to corporations while purchasing secondary claims issued by households and other investors. E.FIs issue and sell their own securities that are more attractive to households than securities directly issued by corporations.

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