sales - CR

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sales - CR

by venmic » Sun Nov 13, 2011 11:26 pm
169. 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.
(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 MEGA's own officers and directors


Can you pleas explain how to tackle this questions

C
Source: — Critical Reasoning |

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by sam2304 » Mon Nov 14, 2011 12:19 am
This is Causal relationship.

Arg says Sales to purchases < 2:1 => rise in stock

in mega corp employees have bought up to nine times as much of it as they have sold
Sales is X, purchase is 9X.

so Sales to Purchase = 1:9 < 2:1 => so rise in stock

IMO C.
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by tuanquang269 » Mon Nov 14, 2011 1:07 am
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

This is the key information.

The ratio of sales/purchase decrease below 2 to 1 for given stock, its price will increase soon.

In recent days, while the price of MEGA Corporation stock has been falling, the corporation's officers and directors have bought up (PURCHASE) to nine times as much of it as they have sold.

When the purchase go up, make the ratio above decrease, the price of MEGA stock will increase soon.
[spoiler]
IMO C[/spoiler]