CFA Practice Question

There are 275 practice questions for this study session.

CFA Practice Question

Which of the following refers to the secondary market?

A. The market in which purchasers are matched with those who wish to sell
B. The market for the original sale of securities by governments and corporations
C. The market in which securities are bought and sold after original sale
D. The market in which dealers buy and sell for themselves, at their own risk
E. A market which has no central location
Correct Answer: C

User Contributed Comments 12

User Comment
Gina what's wrong with A?
min The primary market can also be "where purchasers are matched with those who wish to sell". So A is not the definition for the secondary market.
Done What's wrong with A is that it can also describe the IPO market. This is where an investment bank can match up people with these "hot issues."
accounting i agree with min and Done
soarer1 Secondary market = layman's market
MattNYC A = Call Market
B = Primary Market
D = Continuous Market

At least, I think!! LOL
Beret "A" is the definition of an "exchange" (like the NYSE)
mpapwa22 On A whose correct between MattNYC and Beret?
thekobe and why not E? the secondary market does not has central location
ascruggs92 A. - refers to a market in general, not just the secondary market.

E. - refers to any market that does not have a central location, not just the secondary. The primary market has no central location either.
fabsan Answer A does not refer to the Primary Market because in the statement says ''those who wish to sell''. Usually when there is an IPO we have on Investment banking firm undertaking the shares from the issuer or sometimes you have a conglomerate of Investment banking firms. In any case, the IPO price is well determined in advance and if you want to buy it as a client, either you take the quoted price or you don't get it. As a Buyer, you cannot bid, therefore there is no matching.
fabsan Answer A, is the definition of an Exchange but can also be an OTC market. The OTC market connect buyers and sellers in the same place at a different time. The process is quite simple. You have a Dealer for one security that quote his Bid (the price, he is willing to buy the stock) and his Ask (the price, he is willing to sell the same stock). And the regular investors or institutional investors who wishes to buy or sell will do it through the dealer quoted price.
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