Question

According to the passage, the purpose of the requirement suggested in lines marked with * would be which of the following?

• A. To encourage institutional stockholders to sell stock that they believe will decrease in value.
• B. To discourage institutional stockholders from intervening in the operation of a company whose stock they own.
• C. To discourage short-term profit-taking by institutional stockholders.
• D. To encourage a company’s employees to take an active role in the ownership of stock in the company.
• E. To encourage investors to diversify their stock holdings.

Answer 1

The correct option is C

To discourage short-term profit-taking by institutional stockholders.

This question asks you to identify the stated purpose of the author's suggestion that any institution holding 2 percent or more of a corporation's stock be required to give the public one day's notice of the intent to sell that stock.
The best answer is 'To discourage short-term profit-taking by institutional stockholders'.
The purpose of the requirement that institutions holding 20 percent or more of a company's stock be required to give advance public notice of the sale of that stock is stated to prevent institutions from "trading shares at the propitious moment" and to encourage them to concentrate on increasing a company's productivity.