Question:
In the 'Primary Market' prices of securities are determined by:
In the 'Primary Market' prices of securities are determined by:
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Remember: Primary Market = Fixed by Management. Secondary Market = Fixed by Demand and Supply.
Updated On: Jun 25, 2026
- Management of the company
- Demand and supply of the security
- Employees of the company
- Only demand for the security
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The Correct Option is A
Solution and Explanation
Step 1: Concept
Price Determination in Financial Markets.
Step 2: Meaning
The primary market (New Issue Market) is where securities are sold for the first time by a company to investors.
Step 3: Analysis
• In the primary market, since the security is being issued for the first time, there is no existing market demand or supply to set its price.
• The management of the issuing company (often in consultation with lead bankers or underwriters) determines the initial issue price.
• Demand and supply forces determine the price in the
Secondary Market (Stock Exchange), where existing securities are continuously traded among investors.
Step 4: Conclusion
Therefore, the prices of newly issued securities in the primary market are fixed by the company's management.
Final Answer: (A)
Price Determination in Financial Markets.
Step 2: Meaning
The primary market (New Issue Market) is where securities are sold for the first time by a company to investors.
Step 3: Analysis
• In the primary market, since the security is being issued for the first time, there is no existing market demand or supply to set its price.
• The management of the issuing company (often in consultation with lead bankers or underwriters) determines the initial issue price.
• Demand and supply forces determine the price in the
Secondary Market (Stock Exchange), where existing securities are continuously traded among investors.
Step 4: Conclusion
Therefore, the prices of newly issued securities in the primary market are fixed by the company's management.
Final Answer: (A)
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