Thursday, June 11, 2009

primary and secondary financial markets

financial transactions occur in both primary and secondary financial markets. A primary is one in which a new security is bought and sold. A secondary market is one in which existing securities are exchanged;secondary markets are important to primary markets because they make the instruments traded in the latter markets more liquid. A primary financial market exists for U.S. government securities, corporate bonds, and corporate stock. Newly issued securities constitute additions to the supply of credit. when the U.S. treasury sells $1 billion of newly created bonds. they purchased in what is called the primary securities market. primary markets also exist for newly issued stocks and bonds of nongovernment corporations.

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