Consider the following statements:

1. The instruments of the security market are traded directly between the capital-raiser and the instrument purchaser.

2. Equity market is an example of a primary market.

3. Shares sold on the Bombay stock exchange are examples of primary markets.

Which of the statements given above is/are incorrect?

Solution

● Statement 1 is incorrect: The market in which the instruments of the security market are traded (procured) directly between the capitalraiser and the instrument purchaser is known as the primary market. ● Statement 2 is incorrect: The primary market is where securities are created. It's in this market that firms sell (float) new stocks and bonds to the public for the first time. An initial public offering, or IPO, is an example of a primary market. The secondary market is where securities are traded after the company has sold its offering on the primary market. It is also referred to as the stock market. Equity market is an example of a secondary market ● Statement 3 are incorrect: Shares sold on the Bombay stock exchange are examples of secondary markets.