Question

The diagram below is a diagram of the Users of Funds Underwriter Suppliers of Funds Multiple Choice derivatives markets. commodities markets. О money markets. primary markets. secondary markets.

Answer 1

The correct answer is Primary market.

Primary market is the first issue market where securities are issued for the first time. Underwriters provide services to the user of funds ( companies which needs funds for development, expansion ) and they charge some fee for their services. They match the demand and supply and work as a intermediary between users of funds and suppliers of funds. Suppliers provide funds to underwriters who provides to the companies and in return the issue securities which are given to the investors.

Secondary market option is incorrect as in this market, existing securities are traded between the investors. Underwriters are not involved.

In money market banks and other institutions raises money for short term needs.

Derivative market is the market where instruments like futures, options, forward are traded. There instruments value is based on the basis of some other underlying asset. Investors deal in these instruments by buying/selling these in derivative markets. Underwriters have no role in this.

Commodity market is the market for primary sector (agricultural ) commodities. In this one investor can buy or sell any commodity at spot or future date.

Hope it helps!