Question

which of the following is true of a market maker?
market makers help companies to negotiate mergers and acquisitions.
market makers assist with market liquidity by facilitating the exchange of securities.
market makers rate the creditworthiness of the issuer.
market makers purchase a companys securities before an ipo and then resell them at a premium.

Explanation:

• The first option is incorrect because investment banks (not market makers) typically help with mergers and acquisitions.
• The second option is correct. Market makers' primary role is to provide liquidity by being ready to buy and sell securities, thus facilitating their exchange.
• The third option is incorrect as credit rating agencies rate the creditworthiness of issuers, not market makers.
• The fourth option describes underwriters in an IPO (who buy securities before an IPO and resell), not market makers.

Answer:

B. Market makers assist with market liquidity by facilitating the exchange of securities.