QUESTION 16

In which of the following situations 1 and 2 the transaction is on primary/seconadary market:

1. An investor buys existing shares of Apple stock in the open market. Is this a primary or secondary market transaction?

2. Costa Cafe decides to issue additional stock with the assistance of an underwritter. An investor purchases some of the newly issued shares. Is this a primary market transaction or a secondary market transaction?

A.

In both situations, transactions are in the primary market.

B.

Since new shares of stock are being issued in situation 2, this is a secondary market transaction, while situation 1 is in the primary market.

C.

situation 1 is a transaction in the primary market, while situation 2 is a transaction in the secondary market.

D.

Transaction in situation 1 is in the secondary market, while the transaction of situation 2 is in the primary market.

E.

In both situations, transactions are in the secondary market.