Introduction The stock market is composed of two distinct markets: the primary and secondary markets. Although both of these markets may operate on the same exchange, they are distinctively different. When making distinctions between money and capital markets, the primary determinant is time. Broadly speaking, capital markets are for long-term assets that extend beyond 1 year. This is in contrast to money markets , which are used for short-term assets that are up to 1 year. Learning Materials Primary and Secondary Markets Primary Market The primary market is the initial market where securities are sold on. A firm having an initial public offering (IPO) is an example of a transaction on the primary market. The issuing firm will receive the funds from this initial sale, which is why it is referred to as the primary market. This is a common way for firms to receive substantial amounts of capital. Practically speaking, the primary market is not equally available to all. Given that firms solicit the help of investment bankers, it becomes necessary that they take a role in selling shares.
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- Fall '19
- Stock exchange, Money market