Which market is responsible for the initial issuance of new stocks and bonds?

• A. Secondary market.
• B. Primary market.
• C. Tertiary market.
• D. Derivative market.

Answer: (B)

The initial issuance of new stocks and bonds happens in the primary market. This is where a company or government sells securities directly to investors to raise new capital, with underwriters helping to price and allocate the issue through offerings like an IPO or a new bond issue. The money from this sale goes to the issuer, funding growth or debt repayment. After issuance, those securities then trade among investors in the secondary market, where prices reflect supply and demand and provide liquidity. The derivative market, by contrast, deals with contracts whose value comes from other assets, not the direct issuance of new securities, and the term used for a market devoted to issuing new securities isn’t typically applied to a tertiary market.