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03 Mar 2022, 02:30
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86% (01:45) correct
14%
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The true value of a company can be determined by calculating the net worth of its assets and factoring in the future profit potential of its operations. Higher valued companies command greater prices for their corporate stock. Therefore, a rising stock price indicates that the underlying assets of a company have increased in value or that profit projections for its operations have recently grown.
Which of the following, if true, would most strengthen the conclusion drawn above?
(A) stockbrokers frequently attempt to influence the price of a stock by issuing a sales pitch to easily influence clients.
(B) stock traders purchase and sell the stock of a company based on a logical evaluation of the company's true value.
(C) the price of a company's stock can be affected by other factors such as name recognition and past performance.
(D) for some stock traders, companies in specific sectors are considered more desirable than others.
(E) some management teams can increase both the underlying value of a company's assets and its profit potential without witnessing a rise in their company's stock.
Which of the following, if true, would most strengthen the conclusion drawn above?
(A) stockbrokers frequently attempt to influence the price of a stock by issuing a sales pitch to easily influence clients.
(B) stock traders purchase and sell the stock of a company based on a logical evaluation of the company's true value.
(C) the price of a company's stock can be affected by other factors such as name recognition and past performance.
(D) for some stock traders, companies in specific sectors are considered more desirable than others.
(E) some management teams can increase both the underlying value of a company's assets and its profit potential without witnessing a rise in their company's stock.
kungfury42
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03 Mar 2022, 05:00
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I believe the answer to this should be B.
(A) Gimmicky attempts by stock brokers to influence the stock prices actually undermine the argument that rising prices are an indication of company's true value. Eliminate A.
(B) Perfect!! If stock traders actually trade on prices that they arrive at by a logical evaluation of company's true value, then it clearly strengthens our case that rising stock prices are an indication of an increase in either of the two factors that make up a company's true value.
(C) Other factors such as name recognition and past performance affecting the stock prices weakens the argument that any increase in stock prices is an indicator of increase in company's true value. Eliminate C.
(D) Irrelevant to the discussion at hand. We are not comparing two sectors here. If anything, this says that companies in certain sectors will always be favored and have high stock prices, which anyway weakens our argument. Eliminate D.
(E) Even if this is true, it only says that increase in true value's underlying factors may not bring about an increase in the stock price. However, it doesn't affect the truthfulness of the converse of this statement which is of contention here. Eliminate E.
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(A) Gimmicky attempts by stock brokers to influence the stock prices actually undermine the argument that rising prices are an indication of company's true value. Eliminate A.
(B) Perfect!! If stock traders actually trade on prices that they arrive at by a logical evaluation of company's true value, then it clearly strengthens our case that rising stock prices are an indication of an increase in either of the two factors that make up a company's true value.
(C) Other factors such as name recognition and past performance affecting the stock prices weakens the argument that any increase in stock prices is an indicator of increase in company's true value. Eliminate C.
(D) Irrelevant to the discussion at hand. We are not comparing two sectors here. If anything, this says that companies in certain sectors will always be favored and have high stock prices, which anyway weakens our argument. Eliminate D.
(E) Even if this is true, it only says that increase in true value's underlying factors may not bring about an increase in the stock price. However, it doesn't affect the truthfulness of the converse of this statement which is of contention here. Eliminate E.
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05 Mar 2022, 04:58
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STIMULUS - the first two sentences are the premises and the third sentence is the conclusion. The stimulus is framed in a way showing that cause A(higher net worth of assets) and B(higher profit potential) lead to C(higher value of the company leading to higher stock price) - so when C occurs it represents that either A or B are occurring.
TYPE OF QUESTION- Strengthen
OPTIONS - A - does not strengthen the argument. If stockbrokers influence the price then that may be the underlying reason and not higher net worth or higher profit potential leading to a rise in company value/stock price of the company.
B - If the stock traders are logically evaluating the true value of the company and then purchasing and selling that means that the net worth of the underlying assets may actually be increasing or there is higher profit potential for the company. This is the correct answer.
C - weakens the argument - if we know that there are other factors affecting the value of a company then that means that a rise in value may not just be because of a rise in underlying assets or potential profit.
D - irrelevant to our argument.
E - weakens the argument - similar to option C - if there are other factors affecting then rise in value may not indicate a rise in the other factors.
ANSWER - B
TYPE OF QUESTION- Strengthen
OPTIONS - A - does not strengthen the argument. If stockbrokers influence the price then that may be the underlying reason and not higher net worth or higher profit potential leading to a rise in company value/stock price of the company.
B - If the stock traders are logically evaluating the true value of the company and then purchasing and selling that means that the net worth of the underlying assets may actually be increasing or there is higher profit potential for the company. This is the correct answer.
C - weakens the argument - if we know that there are other factors affecting the value of a company then that means that a rise in value may not just be because of a rise in underlying assets or potential profit.
D - irrelevant to our argument.
E - weakens the argument - similar to option C - if there are other factors affecting then rise in value may not indicate a rise in the other factors.
ANSWER - B
