Question : Which of the following statement is correct?
Statement 1: It is the feature of secondary market to create liquidity in securities.
Statement 2: liquidity means immediate conversion of securities into credit.
Option 1: Both are true
Option 2: Both are false
Option 3: Statement 1 is true and statement 2 is false.
Option 4: Statement 1 is false and statement 2 is true.
Correct Answer:
Statement 1 is false and statement 2 is true.
Solution : The most important feature of the secondary market is to create liquidity in securities. Liquidity means immediate conversion of securities into cash. This job is performed by the secondary market. Any new security cannot be sold for the first time in the secondary market. New securities are first sold in the primary market and their after comes the turn of the secondary market.
Hence, option D is correct.
