Question

Primary and secondary markets

(a) Compete with each other

(b) Complement each other

(c) Function independently

(d) Control each other

Answer 1

(b) Primary and secondary markets complement each other. Primary market deals with the issue of new securities. That is, through the primary market a company raises capital directly from the borrowers. On the other hand, secondary market deals in the purchase and sale of the existing securities. That is, once the securities are issued in primary market, they are then traded in the secondary market. It is in this sense that both the markets complement each other.