Which statement correctly define the Primary Instrument 1 A primary instrument is a financial invest...........

Finance (Phase -I & II) Valuation of Securities

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Which statement correctly define the Primary Instrument?

1.A primary instrument is a financial investmentwhose price is based directly on its market value.

2.Any spot market that trades the 'cash' asset involves a primary instrument.

only 1

only 2

Both 1 and 2

Neither 1 nor 2

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Explanation:

A primary instrument is a financial investment whose price is based directly on its market value. A financial instrument can be any type of financial investment that is priced based on its own value. Examples of primary instruments include stocks, bondsand currency, among others. Any spot market that trades the 'cash' asset involves a primary instrument.
By contrast, the price of derivative instruments, such as options and futures, are often based on the value of a primary instrument.