The Basic Distinction Between a Primary and a Secondary Market

question 48

Multiple Choice

The basic distinction between a primary and a secondary market is

• A) proceeds from sales in the primary market go to the current owner of a security; proceeds in secondary market go to the original owner.
• B) primary markets involve direct dealings within regional exchanges.
• C) only new securities are sold in the primary market; only outstanding securities are bought and sold in the secondary market.
• D) primary markets deal exclusively in bonds; secondary markets deal primarily in common stock.
• E) None of the above.

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Definitions:

Petty Cash Receipt

A document used to record small, miscellaneous expenses paid with petty cash funds.

Cash Equivalents

Short-term, highly liquid investments that are easily convertible into a known amount of cash and close to their maturity.

Commercial Paper

An unsecured, short-term debt instrument issued by corporations, typically for the financing of accounts receivable, inventories, and meeting short-term liabilities.

U. S. Treasury Bills

Short-term government securities issued by the United States Department of the Treasury with maturity periods of one year or less.