You do a study and find out that, on average, stock prices for firms - 6916

Solution Posted by
UoPExpert

UoPExpert

Rating : (2)F
Solution Detail
Price: $1.30
  • From: ,
  • Posted on: Fri 06 Apr, 2012
  • Request id: None
  • Purchased: 0 time(s)
  • Average Rating: No rating
Request Description

You do a study and find out that, on average, stock prices for firms decrease 3% for every 5% decrease in inside ownership. You are watching the nightly business report and find out that Magic Tape’s stock has announced that insiders have sold 10% of their holdings. You are concerned because you own 1,000 shares of Magic Tape and it had closed the day before unchanged at $30 per share. If markets are at least semi-strong form efficient, what would you expect?

A.  You would lose $1,800.

 B.  You would lose $2.00 per share 

 C.  You would expect Magic Tape to close at $28 the day of the announcement. 

 D.  You would lose $4,000. 

 
Solution Description

You do a study and find out that, on average, stock prices for firms decrease 3% for every 5% decrease in inside ownership. You are watching the nightly business report and find out that Magi