An important function of secondary markets is to

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Question: An important function of secondary markets is to

Option a: raise funds for corporations through the sale of securities.
Reasoning: This describes primary markets, where new issues are sold to raise capital. Secondary markets do not raise new funds for issuers; they provide liquidity for existing securities. Therefore this option is incorrect.

Option b: make it easier for households to buy homes.
Reasoning: This is about the housing market, not financial markets. Secondary markets for securities do not directly affect the ease of buying homes. This choice is not aligned with the function of secondary financial markets. Therefore this option is incorrect.

Option c: make it easier for governments to raise money.
Reasoning: Governments typically raise money through primary issuance (debt issuance) in primary markets. Secondary markets do not directly facilitate new government funding; they trade existing securities. Hence this option is incorrect.

Option d: enhance liquidity by making it easier to sell and buy financial instruments.
Reasoning: This is the core role of secondary markets: providing liquidity, enabling investors to buy and sell existing securities with relative ease, and helping to establish price through ongoing trading. This option correctly captures the function. Therefore this option is correct.

MCD2170 - T3 - 2025 Pre-Class Quiz Week 1

An important function of secondary markets is to

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