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The primary market is also known as new issues market. Here, the transaction is
conducted between the issuer and the buyer. In short, the primary market creates new
securities and offers them to the public.
For instance, Initial Public Offering (IPO) is an offering of the primary market where a
private company decides to sell stocks to the public for the first time. An important point
to remember here is that in the primary market, securities are directly purchased from the
issuer.
In the secondary market, the securities issued in the primary market are bought and sold.
Here, you can buy a share directly from a seller and the stock exchange or broker acts as
an intermediary between two parties.
The secondary market is actually formed by another layer of investors who deal with a
primary market investor to buy and sell financial securities such as bonds, futures,
and stocks. These dealings happen in the proverbial stock exchange.
B
Over-the-counter market, trading in stocks and bonds that does not take
place on stock exchanges. It is often called the “off-board market” and
sometimes the “unlisted market,” though the latter term is misleading because
some securities so traded are listed on an exchange.
In the over-the-counter market, dealers frequently buy and sell for their own
accounts and usually specialize in certain issues. Schedules of fees for buying
and selling securities are not fixed.
Standarized Market:
Q NO 2:
The term ‘opportunity cost’ is a simple and general term which can be used in any normal day to day
situation.in finance also, the meaning of opportunity cost does not change, only the factors change.
Opportunity cost is the benefit of one investment sacrificed for investing in the other one. If the
investment option 1 gives 10% as return and option 2 gives 12%. Return of option 1 is the
opportunity cost for option 2 and vice versa. Cost of capital refers to the opportunity cost of
making a specific investment. It is the rate of return that could have been earned by
putting the same money into a different investment with equal risk. Thus, the cost of
capital is the rate of return required to persuade the investor to make a given
investment.
B:
The most important accounting issue for financial assets involves how to
report the values on the balance sheet. Considering all financial assets, there is
no single measurement technique that is suitable for all assets. When
investments are relatively small, the market price at that time would be a
relevant measure. However, for a company that owns a majority of shares in
another company, the market price is not particularly relevant because the
investor doesn’t intend to sell its shares.