Which function of the capital market involves the creation of a secondary market for existing securities? A. Mobilization of savings B. Price determination C. Facilitating company growth D. Risk mitigation
Question
Which function of the capital market involves the creation of a secondary market for existing securities? A. Mobilization of savings B. Price determination C. Facilitating company growth D. Risk mitigation
Solution
The function of the capital market that involves the creation of a secondary market for existing securities is A. Mobilization of savings. This function allows for the transfer of assets from those who have an excess of funds (savers) to those who are in need of funds (borrowers). This is done through the buying and selling of securities like stocks and bonds. The secondary market is where these trades occur after the securities have been initially issued in the primary market.
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