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If Apple Computer decided to issue additional common stock, and Varga purchased 100 shares of this stock from Smyth Barry, the underwriter, would this transaction be a primary or a secondary market transaction? Would it make a differance if Varga purchased previously outstanding Apple stock in the dealter market? Explain.
Expert Answer
Purchase of shares from the underwriters shall be primary market transaction. The underwriters are authorised by the company issuing the shares to sell the new shares. They act as an intermediatery betwween the company and the buyer of shares. Hence, purchasse of shares from underwriters shall be equivalent to buying new shares..
Purchase previously issued shares from the dealer market is a secondary market transaction.
