1. There are two kinds of secondary markets: auction markets and dealer markets. True False 2....

1. There are two kinds of secondary markets: auction markets and dealer markets.

	True
	False

2. The agency problem is the possibility of a conflict of interest between the management and employees of a company:

	True
	False

Solutions

Expert Solution

Q1 - True.

The secondary market can classified into two specialized categories: auction market and dealer market.

In the auction market, all individuals and institutions that want to trade securities congregate in one area and announce the bid and ask prices. In a dealer market, two parties are not required to converge in a central location. Instead, participants in the market are joined through electronic networks.

Q2 - false

The agency problem is the possibility of a conflict of interest between the management and shareholders of company. Shareholders are the owners of the company, who have kept the management as a guard. The management's performance is also decided by stock price, who may unnecessarily take risks which may increase the risk of losses. So, there is an agency problem, where the management has to balance their performance and also act in best interest of the shareholders.

jeff jeffy answered 1 year ago

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