Question

The volume of trading in ABC Company (a listed stock) is as follows:

Last Week: 15,000 shares traded
Two Weeks: 17,200 shares traded
Three Weeks: 19,600 shares traded
Four weeks: 18,100 shares traded
Five Weeks: 17,100 shares traded
Mr. Brown owns 200,000 shares of restricted stock of ABC Company. ABC Company has 1,840,000 shares outstanding. If Mr. Brown wanted to sell his shares today, what is the maximum number of shares he could sell according to Rule 144?

a. 17,475
b. 18,000
c. 18,400
d. 20,000

Answer 1

The maximum number of shares Mr. Brown can sell according to Rule 144 is 18,400 shares.

Step-by-step explanation:

In order to determine the maximum number of shares Mr. Brown can sell according to Rule 144, we need to calculate the volume limit. The volume limit is the greater of 1% of the outstanding shares or the average weekly trading volume over the last 4 weeks.

First, we calculate 1% of the outstanding shares: 1% of 1,840,000 shares is 18,400 shares.

Next, we calculate the average weekly trading volume over the last 4 weeks: (15,000 + 17,200 + 19,600 + 18,100) / 4 = 17,225 shares.

The maximum number of shares Mr. Brown can sell is the greater of the two calculations, which is 18,400 shares.

Therefore, the correct answer is c. 18,400.