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# Corporate officers and directors commonly buy and sell, for

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Manager
Joined: 14 Dec 2004
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05 Apr 2005, 19:23
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Difficulty:

35% (medium)

Question Stats:

73% (00:51) correct 27% (01:05) wrong based on 49 sessions

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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 corporationâ€™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?
(A) The imbalance between inside purchases and inside sales of MEGA stock will grow even further.
(B) Inside purchases of MEGA stock are about to cease abruptly.
(C) The price of MEGA stock will soon begin to go up.
(D) The price of MEGA stock will continue to drop, but less rapidly.
(E) The majority of MEGA stock will soon be owned by MEGAâ€™s own officers and directors.
[Reveal] Spoiler: OA

Last edited by Skywalker18 on 12 Nov 2017, 19:49, edited 1 time in total.

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05 Apr 2005, 19:29
Premise:
sales: purchase below 2:1 --> rise in stock price imminent
Claim:
sales:purchase = 1:9 --> stock price falling

The facts above best support which of the following predictions?
(A) The imbalance between inside purchases and inside sales of MEGA stock will grow even further.
- Can't tell this from the premise given

(B) Inside purchases of MEGA stock are about to cease abruptly.
- We also won't know if it will be abrut

(C) The price of MEGA stock will soon begin to go up.
- We know if the ratio falls below 2:1, the price should rise. So this should be the answer.

(D) The price of MEGA stock will continue to drop, but less rapidly.
- Again, we can't tell based on the premise given

(E) The majority of MEGA stock will soon be owned by MEGAâ€™s own officers and directors.
- We won't know if this will actually happen

C it is.

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Manager
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05 Apr 2005, 19:34
Thanks for the explanation. OA is C.

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05 Apr 2005, 20:34
cloaked_vessel 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 corporationâ€™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?
(A) The imbalance between inside purchases and inside sales of MEGA stock will grow even further.
(B) Inside purchases of MEGA stock are about to cease abruptly.
(C) The price of MEGA stock will soon begin to go up.
(D) The price of MEGA stock will continue to drop, but less rapidly.
(E) The majority of MEGA stock will soon be owned by MEGAâ€™s own officers and directors.

C it is.

if sales/purchase < 2 ---> stock prices rise

now purchase = 9 sales, i.e. sales / purchase =1/9
so, stock prices will go up.

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10 Feb 2014, 08:36
cloaked_vessel 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 corporationâ€™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?
(A) The imbalance between inside purchases and inside sales of MEGA stock will grow even further.
(B) Inside purchases of MEGA stock are about to cease abruptly.
(C) The price of MEGA stock will soon begin to go up.
(D) The price of MEGA stock will continue to drop, but less rapidly.
(E) The majority of MEGA stock will soon be owned by MEGAâ€™s own officers and directors.

Please update the OA in the first post.

The OE is:

Since MEGA’s officers and directors have bought almost nine times as much of MEGA’s stock as they have sold, the ratio of inside sales to inside purchases is roughly 1 to 9, well below 2 to 1. Hence, by the generalization stated in the passage, as rise in MEGA’s stock price is imminent and choice C is the best answer.

Since the prediction in choice D runs counter to the stated generalization, choice D is not supported. The passage does not suggest there will be an increase in the imbalance between such purchases and sales. Thus, choice A is not supported. Similarly, the passage suggests neither that inside purchases are about to cease nor that the majority of MEGA stocks will soon be owned by MEGA officers and directors. Thus, neither choice B nor choice E is supported.
_________________

Thanks,
Kinjal

My Application Experience : http://gmatclub.com/forum/hardwork-never-gets-unrewarded-for-ever-189267-40.html#p1516961

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29 Jun 2016, 13:25
Hello from the GMAT Club VerbalBot!

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Senior Manager
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14 Sep 2017, 19:42
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?

(A) The imbalance between inside purchases and inside sales of MEGA stock will grow even further.
- we don't know that there was an inbalance in the first place...and have no way to verify this.

(B) Inside purchases of MEGA stock are about to cease abruptly.
- "abruptly" = extreme language. we don't know this for sure.

(C) The price of MEGA stock will soon begin to go up.
- correct as is. if your ratio is sales/purchase and decreasing this # will increase the stock price -- the stock price is going to decrease. this is b/c the passage says the corp's officers are buying 9x the # they've sold. huuge imbalance. the # is going down.

(D) The price of MEGA stock will continue to drop, but less rapidly.
- OPPOSITE. see "C" for clarification

(E) The majority of MEGA stock will soon be owned by MEGA's own officers and directors.
- we don't know this. maybe there was an overwhelming majority going the other way and after this, it would be 50/50?

I treated this Q like an Inference. Just looked for the statement I thought must be true here.

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Re: Corporate officers and directors commonly buy and sell, for   [#permalink] 14 Sep 2017, 19:42
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