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# Corporate officers and directors commonly buy and sell, for

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Moderator
Joined: 01 Sep 2010
Posts: 3348

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11 Feb 2013, 12:46
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Corporate officers and directors commonly buy and sell, for their own portfolios, stock in their own corporations. Generally, when the ratio of such inside sales to inside purchases falls below 2 to 1 for a given stock, a rise in stock prices is imminent. In recent days, while the price of MEGA Corporation stock has been falling, the corporation’s officers and directors have bought up to nine times as much of it as they have sold.

The facts above best support which of the following predictions?

The imbalance between inside purchases and inside sales of MEGA stock will grow even further.

Inside purchases of MEGA stock are about to cease abruptly

The price of MEGA stock will soon begin to go up.

The price of MEGA stock will continue to drop, but less rapidly.

The majority of MEGA stock will soon be owned by MEGA’s own officers and directors.
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Kudos [?]: 8739 [0], given: 1138

Intern
Joined: 15 Jan 2013
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12 Feb 2013, 05:05
carcass wrote:
Corporate officers and directors commonly buy and sell, for their own portfolios, stock in their own corporations. Generally, when the ratio of such inside sales to inside purchases falls below 2 to 1 for a given stock, a rise in stock prices is imminent. In recent days, while the price of MEGA Corporation stock has been falling, the corporation’s officers and directors have bought up to nine times as much of it as they have sold.

The facts above best support which of the following predictions?

The imbalance between inside purchases and inside sales of MEGA stock will grow even further.

Inside purchases of MEGA stock are about to cease abruptly

The price of MEGA stock will soon begin to go up.

The price of MEGA stock will continue to drop, but less rapidly.

The majority of MEGA stock will soon be owned by MEGA’s own officers and directors.

internal purchase=9 times internal sales
=> internal purchase/internal sales =9/1
=> internal sales/internal purchase=1/9 <2
=> stock price rises

Kudos [?]: 29 [0], given: 6

VP
Joined: 24 Jul 2011
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12 Feb 2013, 05:12
The stimulus says that when the ratio of inside sales to inside purchases falls below 2:1, a rise in stock prices is imminent, i.e. sure to happen in the near future.

A): We cannot conclude this as we are not given any relationship between how the inside sales and purchases of MEGA stock will move in the future
B): We cannot conclude this as no information is given to this effect
C): Correct. This follows from the stimulus through only slight inference.
D): We know that the stock price has been dropping but do not know how it will continue to move in the future.
E): We are given no information on this.

C it is.
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Current Student
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28 May 2013, 11:12
hi,
IMO ans is C.
(sales/purchase)<(2/1) >>>>stock price increase..
can be written as:-
(purcharse/sales)>(1/2)>>>>stock price increase..

now
stock price is decreasing and (purchase/sales)>(9/1)
and (9/1)>(1/2)

so (purchase/sales)>(1/2)>>>>>stock price increase..

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Manager
Joined: 22 Dec 2012
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28 May 2013, 23:09
Corporate officers and directors commonly buy and sell, for their own portfolios, stock in their own corporations. Generally, when the ratio of such inside sales to inside purchases falls below 2 to 1 for a given stock, a rise in stock prices is imminent. In recent days, while the price of MEGA Corporation stock has been falling, the corporation’s officers and directors have bought up to nine times as much of it as they have sold.

The facts above best support which of the following predictions?

1)The imbalance between inside purchases and inside sales of MEGA stock will grow even further.
This statement is trying to predict future data point based on current sample data points. Wrong.

2)Inside purchases of MEGA stock are about to cease abruptly
Same as 1

3)The price of MEGA stock will soon begin to go up.
The word imminent in the argument suggests that the prices are bound to go up. Correct.

4)The price of MEGA stock will continue to drop, but less rapidly.
This might be true. But the imminent or unavoidable rise in stock prices negates this. Wrong

5)The majority of MEGA stock will soon be owned by MEGA’s own officers and directors.
We are not sure of the number of outstanding shares. Wrong.

Kudos [?]: 20 [0], given: 57

Re: Corporate officers and directors commonly buy and sell, for   [#permalink] 28 May 2013, 23:09
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