Question

Distinguish between Primary Market and Secondary Market on any four bases.

Hint:

The primary market helps raise new capital, while the secondary market facilitates the trading of existing securities.

Answer 1

Primary Market:
(i) It involves the sale of securities by new companies or new issues of securities by existing companies to investors.
(ii) Securities are sold by the company to the investors directly.
(iii) It directly promotes capital formation.
(iv) Only buying of securities takes place.
Secondary Market:
(i) There is trading of existing shares only.
(ii) Ownership of securities is exchanged between investors.
(iii) It indirectly promotes capital formation.
(iv) Both buying and selling of securities takes place.