Series 7 Exam Question 5: Answer and Explanation

Question: 5

An investor has held shares of ABC restricted stock for over one year. ABC has 3,000,000 shares outstanding. The most recently reported weekly trading volumes for ABC are as follows:

Week EndingTrading Volume
July 3130,000 shares
July 2440,000 shares
July 1725,000 shares
July 1035,000 shares
July 340,000 shares

What is the maximum number of shares the investor can sell under Rule 144?

  • A. 30,000
  • B. 32,500
  • C. 35,000
  • D. 40,000

Correct Answer: B

Explanation:

B. Because this is restricted stock, the investor may sell the average weekly trading volume for the previous 4 weeks or 1 percent of the outstanding shares, whichever is greater.

30,000+40,000+25,000+35,0004=130,0004=32,5001%×3,000,000=30,000

The average weekly trading volume for the previous 4 weeks (the top 4 numbers) is 32,500 shares, and 1 percent of the outstanding shares is 30,000. Since 32,500 is larger, that's the answer.

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