Reading comp PrepTest 148 · Section 2 · Question 19

Passage

 . Passage A  .       Insider-trading law makes it a crime to make  . stock transactions, or help others make stock Remaining source text redacted.
Passage walkthrough
Passage Summary

Topic: Legal Studies


Passage A

Paragraph 1

  • Paragraph note
    • A crime is defined
  • Views, minor Meta-Structures, points of intersection, and the author's attitude
    • Insider trading - stock transactions based on special info from working for the company

Paragraph 2

  • Paragraph note
    • Author questions the whether it should be a crime
  • Views, minor Meta-Structures, points of intersection, and the author's attitude
    • Trading based on info only you have - isn’t that part of a functioning market?
    • g. Analyzing a stock and deciding it’s overvalued (did your homework)

Paragraph 3

  • Paragraph note
    • How stock markets work, and when they function best
  • Views, minor Meta-Structures, points of intersection, and the author's attitude
    • Stock market - Reflects everyone’s info
    • Work best - All relevant info is spread widely and quickly

Paragraph 4

  • Paragraph note
    • Tying insider trading to functional stock market
  • Views, minor Meta-Structures, points of intersection, and the author's attitude
    • Insider info → Buy/sell a stock → Get that info out → Good for everyone!

Paragraph 5

  • Paragraph note
    • Insider trading compared to something else
  • Views, minor Meta-Structures, points of intersection, and the author's attitude
    • “Insider nontrading” - when someone doesn’t sell/buy because of what they know
    • More common and clearly legal

Passage B

Paragraph 1

  • Paragraph note
    • A basic principle of the stock market is noted
  • Views, minor Meta-Structures, points of intersection, and the author's attitude
    • Basic principle - Transparency - Everyone has all the info at the same time, and skill determines who makes money

Paragraph 2

  • Paragraph note
    • Insider trading is showed to violate this principle
  • Views, minor Meta-Structures, points of intersection, and the author's attitude
    • Insider trading - Some make decisions that others don’t
    • Author - That’s unfair
    • Outcome - Difficult/impossible for some to make money

Paragraph 3

  • Paragraph note
    • Eventual repercussions of insider trading
  • Views, minor Meta-Structures, points of intersection, and the author's attitude
    • People - Invest to make money
    • People trade with insider info → Investors lose confidence → Stop investing → Market destroyed

Main Points:

Passage A - Because it’s analogous to a practice that should clearly be legal and it gets information out quickly, insider trading is good for the stock market.

Passage B - Because it unfairly compromises the market and doesn’t reward skilled investing, insider trading can cause a loss of investor confidence that will destroy the market.

Key Lines?

Passage A:

  • Lines 6-8 - Rhetorical question that shows Author’s attitude
  • Lines 16-18 - Author’s opinion of when markets work “best”
  • Paragraph 4 - Step-by-step argument of how insider trading helps
  • Lines 35-36 - Author uses comparison to make same point

Passage B:

  • Lines 37-38 - Author states “basic principle[]” of stock market
  • Lines 50-51 - Author states opinion on insider trading (unfair)
  • Paragraph 3 - Step-by-step argument of how insider trading hurts

Meta-Structure? Relationship Between Passages?

Both passages feature strong opinions on the same topic - insider trading. However, their opinions are the opposite of each other. Passage A believes that insider trading is good for the stock market, in that it “helps spread the knowledge” quickly (Lines 24-27). Passage B, on the other hand, argues that it will “destroy the market” through a loss of investor confidence (Lines 55-56).

Causal chain - Both passages feature a causal chain of how insider trading will lead to the outcome they predict, even if that outcome is different. Passage A argues that someone learns insider info, causing them to trade on it, causing others to notice the change in price, causing the information to spread (Paragraph 4). Passage B argues that someone learns insider info, causing them to trade on it, causing others to lose confidence that they can make money without insider info, causing them to stop investing, causing the market to crash (Paragraph 3). These causal progressions will likely feature in at least one question.

Last Thoughts?

Passage A’s comparison to “insider nontrading” is interesting in that it almost functions as a separate argument, and one that falls into a common pattern of reasoning. If that paragraph was removed from the passage, the Author’s initial argument would still stand on its own. And that last paragraph could itself serve as the basis for a separate passage on why insider trading should be legal. It also serves as one of our common methods of reasoning - showing that similar logic in an analogous case leads to a ridiculous outcome (“No one would think to…”).

Question prompt

The passages' references to Remaining source text redacted.
Why the credited answer is right

Credited answer: D

The notes below walk through why it fits the stem and how to eliminate the rest.

Question Type

Legal

Strategy Overview

Review the function of each statement in question in its immediate context, the context of the paragraph, and the context of the passage as a whole individually, and then find an answer that properly characterizes each function

Answer Anticipation

A quick look at the answers tells us that each one is phrased as, “Passage A does X, whereas Passage B does Y.” This tells us that we should define them each individually, but that the correct answer will likely be phrased in a way that highlights how they’re related (either as similar or different - likely the latter, based on “whereas”). So let’s analyze each one in turn.Lines 11-14 show up in Paragraph 2 of Passage A, which we said was meant to bring up a rhetorical question about insider trading and relates it to analyzing the stock market and doing research. The “analysis of information” asked about in the question stem is a part of that research, so the Author of Passage A brings it up to suggest it’s similar to insider trading and since the former is clearly legal, the latter should be, too.Lines 40-42 show up in Paragraph 1 of Passage B, where we said the Author was noting a basic principle of the stock market - transparency. He says, then, that gaining an advantage in the market is only through skill at analyzing stocks. This is then contrasted (in Paragraph 2 of Passage B) with gaining an advantage not through skill at analyzing stocks but gaining it because of access to insider information.The similarity between the two is that they both compare the analysis of information to insider information. However, the Author of Passage A says that the two are similar, while the Author of Passage B says that the two are different. Let’s find an answer reflecting that.

Answer choices

  1. A
    Passage A presents it Remaining source text redacted.
    Why choice A is not credited

    (A) (Lines 11-15; Lines 40-42) Passage A’s Author presents it as just one way to gain an advantage in the stock market (another being insider trading), so she does agree that it’s unnecessary. However, she doesn’t do so because relevant information is already priced into the stock - her whole argument is that information sometimes comes along that isn’t yet priced into the stock, including this analysis! Passage B does claim, however, that you can gain an advantage “only” by skill in analyzing the market.

  2. B
    Passage A uses it Remaining source text redacted.
    Why choice B is not credited

    (B) (Lines 8-10; Lines 40-42) Passage A doesn’t mention transparency - it uses it as an example of the type of information that only one person would have. And Passage B notes that in a transparent market, only skill at such analysis gives you an advantage, but that doesn’t mean that in a non-transparent market it becomes useless - that’s an illegal negation!

  3. C
    Passage A presents it Remaining source text redacted.
    Why choice C is not credited

    (C) (Lines 8-10; Lines 40-42) Passage A doesn’t consider such analysis unfair (and, in fact, only Passage B mentions unfairness - Line 50). And Passage B says that such analysis is valuable in a transparent market - it doesn’t say that the analysis leads to a transparent market.

  4. D
    Passage A presents it Remaining source text redacted.
    Why choice D matches the stem

    (D) (Lines 6-8; Lines 11-14; Lines 40-42; Lines 46-48) Passage A uses a rhetorical question to connect the definition of insider trading to analysis that one does of the stock market. Both, according to the Author of Passage A, are pieces of information that one person has that others lack. The Author of Passage B, on the other hand, mentions analysis of information available to everyone in a transparent marketplace, contrasting it with insider trading, where some information is available only to some traders. So Passage A says that insider trading and analysis are similar in that they’re both information only some people have, whereas Passage B talks about analysis of information available to everyone as different from trading based on information available only to a few. This answer highlights the role of the analysis of information in each paragraph and frames it in a way that correctly compares them, so this is the correct answer.

  5. E
    Passage A treats it Remaining source text redacted.
    Why choice E is not credited

    (E) (Lines 8-11; Lines 11-14; Lines 40-42) While Passage A does mention stock brokering in the previous line, it then pivots to the second-person (“If you analyze”), addressing readers who may not be stock brokers. So while Passage B does present this analysis as something that anyone can do with information that’s publicly available, Passage A doesn’t limit it just to brokers and other professionals, so this answer is incorrect.

What this tests

Question analytics

Based on historical answer selection rates for this question.

Answer choice distribution

  1. A 5%
  2. B 29%
  3. C 13%
  4. D Credited 44%
  5. E 10%

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Discussion

  • Why D? 1 reply

    Started by Marissa-Avnaim

  • Answer b 3 replies

    Started by AllieC

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