The secondary market
[ Select ]
is a market where only shares are traded
is the same as the money market where debt instruments with short maturities are traded
allows investors to buy or sell bonds and equities after they were issued in the primary market
is the same as the over-the-counter market where only bonds are traded

Question

The secondary market 
[ Select ]
is a market where only shares are traded
is the same as the money market where debt instruments with short maturities are traded
allows investors to buy or sell bonds and equities after they were issued in the primary market
is the same as the over-the-counter market where only bonds are traded

BlackTom AI · Accepted Answer

In this question, we’re evaluating statements about the secondary market and identifying which option correctly describes its function.
Option A suggests that the secondary market is a market where only shares are traded. While the secondary market does involve trading securities, it is not limited to shares alone; it also includes bonds and other instruments in many contexts, so this statement is inaccurate because it overgeneralizes to only shares.
Option B claims that the secondary market is the same as the money market, where debt instruments with short maturities are traded. This is misleading: the money market is a subset focused on short-term debt instruments, whereas the secondary market broadly encompasses the trading of existing securities (both stocks and bonds) after issuance, across longer and varied maturities. Equating the two conflates distinct markets with different purposes.
Option C states that the secondary market allows investors to buy or sell bonds and equities after they were issued in the primary market. This precisely captures the core function of the secondary market: trading existing securities that have already been issued in the primary market, enabling liquidity and price discovery for both stocks and bonds.
Option D claims that the secondary market is the same as the over-the-counter market where only bonds are traded. The over-the-counter (OTC) market is a separate trading venue that can involve bonds, equities, and other instruments, and the secondary market can operate both on exchanges and OTC. Saying it is the same as OTC and that only bonds are traded is inaccurate because equities are also traded in the secondary market, including on exchanges.
Overall, the only statement that correctly defines the secondary market’s function is Option C, while the other options either mischaracterize scope (A), conflate markets (B), or incorrectly equate to OTC and limit instruments (D).

COMM_V 298 101 102 103 2025W1 Class 1 and 2 Practice Quiz

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