Question : Statement 1: A primary dealer assists in the distribution of government securities.
Statement 2: Primary dealers are primarily involved in the secondary market trading of securities.
Option 1: Statement 1 is true, and statement 2 is true.
Option 2: Statement 1 is true, but statement 2 is false.
Option 3: Statement 1 is false, and statement 2 is true.
Option 4: Statement 1 is false, and statement 2 is false.
Correct Answer:
Statement 1 is true, and statement 2 is true.
Solution : The correct answer is (a) Statement 1 is true, and statement 2 is true.
Statement 1 is true. Primary dealers are financial firms or institutions that are authorized by the government's central bank or monetary authority to deal directly in government securities during the primary market issuance.
Statement 2 is also true. While primary dealers do assist in the distribution of government securities in the primary market, they are also heavily involved in the secondary market, where they trade these securities among themselves and with other market participants, providing liquidity to the market.
