Which of the following statements about organized security markets is correct?
A. Organized security markets are examples of financial intermediaries.
B. Organized security markets transfer resources from savers to borrowers.
C. Organized security markets provide secondary markets.
D. Organized security markets aren’t subject to regulation.
I would think the answer is C
Wrong
that's the only one I can thank of because once a security has been issued on the primary market, it can be sold again in the secondary markets like AMEX and NYSE.
The reason why I didn't select A and B because those are both the same answers. Financial intermediaries facilitates the transfer of funds from savers and borrowers.
I didn't select D because AMEX and NYSE are subject to regulation.
I would like to know why I would be wrong. Some of these questions I have are the ones I have left that I want to make sure my thinking is correct.
I misread D. You are correct. There are many secondary issues trades in regulated exchanges. ETFs are an example.
I regret my error.
To determine the correct answer, let's break down each statement:
A. Organized security markets are examples of financial intermediaries.
This statement is incorrect. Organized security markets are not financial intermediaries. Financial intermediaries, such as banks and credit unions, facilitate the transfer of funds between savers and borrowers. Security markets, on the other hand, are platforms where securities (stocks, bonds, etc.) are bought and sold.
B. Organized security markets transfer resources from savers to borrowers.
This statement is also incorrect. Organized security markets do not directly transfer resources between savers and borrowers. Instead, these markets provide a platform for investors (savers) to buy and sell securities issued by firms (borrowers). The transfer of resources occurs when securities are issued or sold, but the market itself does not facilitate this transfer.
C. Organized security markets provide secondary markets.
This statement is correct. Organized security markets do provide secondary markets. A secondary market is where previously issued securities are traded between investors. In other words, it is where investors buy and sell securities from other investors, rather than buying them directly from the issuing company (primary market).
D. Organized security markets aren’t subject to regulation.
This statement is incorrect. Organized security markets are subject to regulation to ensure fair and orderly trading, protect investors, and maintain market integrity. Governments and regulatory bodies establish rules and regulations to govern the operation of these markets and monitor compliance.
Based on the explanations above, the correct statement is:
C. Organized security markets provide secondary markets.