Question

Secondary markets help support primary markets because secondary markets
I. offer primary market purchasers liquidity for their holdings.
II. update the price or value of the primary market claims.
III. reduce the cost of trading the primary market claims

Answer 1

Answer:

All three options are correct.

Explanation:

Capital market is the financial market that trades in long term funds. It is divided into two divisions,  

• Primary market
• Secondary market

The primary market holds initial public offerings. In other words, the stocks are initially sold in the primary market by the issuers directly. The secondary market deals with securities that have already been circulated in the primary market.  

The secondary market provides liquidity to the investors both buyers and sellers. Stocks and shares bought from the primary market can be easily sold in the secondary market.  

Prices in the secondary market are determined through the demand and supply of shares. In this way, the secondary market also updates the price of the stocks issued in the primary market.  

There is a large number of buyers and sellers in the secondary market. These stocks are traded in the secondary market at a very low cost.