Question:
In a dealer market, some dealers hold a certain inventory of specific securities and create a liquid market by purchasing and selling their inventories. These dealers make a market and are thus called market makers. Agents in the market bring investors to the dealers through a network of terminals and electronic systems. Where do dealer profits come from in a dealer market?
A. Interest charges
B. The bid-ask spread
C. Dividend payments
Answer: B. The bid-ask spread