Question

The market where existing securities are bought and sold is known as

• A. Primary market
• B. Secondary market
• C. Capital market
• D. Financial market

Answer 1

The Correct Option is B

The correct answer to the question is Secondary market. In Business Studies, understanding the differences between various types of markets is crucial. 

To comprehend this:

• Primary Market: This is where new securities are issued and sold for the first time. Companies go public by offering new stock through an IPO (Initial Public Offering).
• Secondary Market: This is where existing securities are traded among investors. The key feature is that the issuing companies do not receive any money from these trades. An example is the stock exchange, like NYSE or Nasdaq.
• Capital Market: This is a broader term that includes both the primary and secondary markets. It deals with long-term debt and equity-backed securities.
• Financial Market: This encompasses all types of markets, including capital markets, money markets, and other financial instruments.

From the explanations, it's evident that the Secondary market is where existing securities are bought and sold among investors.

Answer 2

To identify the correct market where existing securities are bought and sold, let's analyze each option in detail:

Options Analysis

Primary Market (1)

Definition: The primary market is where new securities are issued and sold for the first time. This includes initial public offerings (IPOs) and other new issues of stocks, bonds, and other securities.

Why Not: The primary market is focused on the issuance of new securities, not the trading of existing ones.

Secondary Market (2)

Definition: The secondary market is where existing securities are bought and sold among investors. This includes stock exchanges like the New York Stock Exchange (NYSE) and NASDAQ, as well as over-the-counter (OTC) markets.

Why Correct: The secondary market is specifically designed for the trading of existing securities, making it the correct answer.

Capital Market (3)

Definition: The capital market is a broader term that includes both the primary and secondary markets. It refers to the market for long-term financial instruments, such as stocks and bonds.

Why Not: While the capital market includes the secondary market, it is not specifically defined as the market for trading existing securities.

Financial Market (4)

Definition: The financial market is an overarching term that encompasses all markets where financial instruments are traded, including both short-term and long-term instruments.

Why Not: The financial market is a broad category that includes various types of markets, not just the market for trading existing securities.

Conclusion

The correct answer is: (2) Secondary market

The secondary market is where existing securities are bought and sold among investors, making it the specific market for trading existing securities.