Your uncle is a senior manager in a large listed Australian company. You overhear him talk about the financial results of his company. The profits are higher than expected and have not been disclosed publicly.

1. Based on your knowledge of finance concepts, what should you do to profit from this inside information? (3 marks)

2. How does your action depend on the validity of stock market efficiency? (3 marks)

3. Examine from an ethical standpoint, whether you should attempt to benefit from this inside information. What risks do you face by trying to exploit your informational advantage? (4 marks)