Which of the Following Situations Would Be Considered Insider Trading

question 304

Multiple Choice

Which of the following situations would be considered insider trading?

• A) You open the morning paper and read that Sun Microsystems has a new CEO, who plans to bring in his own team. You decide to call your broker and buy shares of Sun Microsystems.
• B) Your Uncle Jerry works for Microsoft and sends you a news release put out by the company that talks about the acquisition of a Chinese company. You believe this will significantly boost Microsoft revenues so you buy 200 shares through an online service.
• C) You call your stockbroker and ask him to buy 500 shares of your company, Best Dressed Computers, Inc., because you just heard from the CEO's administrative assistant that the CEO just got the boot! You figure that this emotional news has got to help the stock price.
• D) Your stockbroker calls and recommends that you diversify your portfolio with a few shares of SLB [Schlaumberger] because SLB's request through the FTC and several international trade commissions to finalize the purchase of two oil companies was successful. You act on this information.

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Definitions:

Optimal Level

The most favorable or desirable degree of efficiency, concentration, or condition for a particular process or function.

Stimulation

The action of arousing interest, excitement, or activity in someone or something, or the condition of being stimulated.

Expectancy

A belief or anticipation regarding the likelihood that a specific outcome will occur as a result of certain actions or behaviors.

Homeostasis

The process by which a living organism or cell maintains a stable internal environment despite changes in external conditions.