Regarding the primary market 1 It enables the companies to raise funds from the publi...........

Economic Affairs Financial Markets

Download Solution PDF

Regarding the primary market:

1. It enables the companies to raise funds from the public

2. The prices of the shares are determined on the basis of their demand and supply

3. It promotes capital formation

The correct statement(s) is/are-

1 and 2

1 and 3

Only 3

All of these

छोटे Courses बड़े Results

Master Financial Markets

Prepare through Micro-courses

Try Now

Explanation:

Exp:- primary market is the part of the capital market that deals with issuing of new securities. Primary markets create long term instruments through which corporate entities raise funds from the capital market.

Exp:- In a primary market, companies, governments or public sector institutions can raise funds through bond issues and corporations can raise capital through the sale of new stock through an initial public offering (IPO).

By: Abhipedia

Profile ResourcesReport error

Submit Error

Let's Discuss

Post Comment

Harpreet Singh

option 2 is right because when any co. issue first time shares in primary market used Book Building Process. The price is decided by co. share on the basis of demand and supply through Book Building Process.

Shubham Tiwari

Apart from above mentioned the issue price is set by the company when it first sells shares to investors and is usually based on the amount of money the company needs to raise. On the other hand, the market price may be higher or lower than the issue price. The market price is determined by supply and demand in the open market.

Shubham Tiwari

You are correct in case of secondary market but this is not the fundamental working principle in Primary market condition. Therefore option 2nd is incorrect.

Shubham Tiwari

Initial public offering (IPO) occurs when a private company sells shares of stock to the public for the first time and the sale price of such a new issue is determined by a concerned underwriter, which may or may not be a financial institution. The demand and supply works only if it enters into the secondary market because prior to that its price is not fixed. It is acting as a tool to raise money which in itself is not guaranteei.e. The primary market doesn't provide liquidity for the stock.

Atika