University of Central Florida (UCF) ECO3223 Money and Banking Practice Exam 1

Question: 1 / 400

True or False: Primary markets involve a borrower receiving funds from a lender through newly issued securities.

True

The statement is true because primary markets are where new securities are created and sold for the first time. In this context, a borrower, such as a corporation or government, issues new securities to raise funds directly from lenders or investors. The funds raised in this market are essential for entities to finance their operations, invest in projects, or meet other capital needs. When investors purchase these newly issued securities, they provide the necessary funds to the borrower.

This process distinguishes primary markets from secondary markets, where existing securities are traded among investors without the involvement of the issuing entity, meaning that no new funds flow to the original borrower. Therefore, the essence of primary markets—facilitating the direct flow of funds from lenders or investors to issuers through newly created securities—is accurately captured in the statement.

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False

Only for equities

Only for debts

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