Alternative A None Alternative B 5% front-end Alternative C 3% to purchase; 3% to sell Load or commission Expected annual total returns 10.73% 10.62% 11.01% Risk Moderate Moderate Moderate Management fees 0.4% 1.2% Questions: 1. Which investment altenative: a Provides the highest returns to the client? b. Provides the highest profits to Stuart & Co.? 2. If your answer to (b) is not the same as your answer to (a) and Philip recommends the highest profit choice, is he acting unethically? Why or why not?
Alternative A None Alternative B 5% front-end Alternative C 3% to purchase; 3% to sell Load or commission Expected annual total returns 10.73% 10.62% 11.01% Risk Moderate Moderate Moderate Management fees 0.4% 1.2% Questions: 1. Which investment altenative: a Provides the highest returns to the client? b. Provides the highest profits to Stuart & Co.? 2. If your answer to (b) is not the same as your answer to (a) and Philip recommends the highest profit choice, is he acting unethically? Why or why not?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Need requiremetn 1 and 2 only
Three Investment Alternatives
Alternative A
None
Alternative B
5% front-end
Alternative C
3% to purchase;
3% to sell
Load or commission
Expected annual total
returns
10.73%
10.62%
11.01%
Risk
Moderate
Moderate
Moderate
Management fees
0.4%
1.2%
Questions:
1. Which investment alternative:
a. Provides the highest returns to the client?
b. Provides the highest profits to Stuart & Co.?
2. If your answer to (b) is not the same as your answer to (a) and Philip recommends the highest
profit choice, is he acting unethically? Why or why not?
3. Which alternative should the top management of Stuart & Co. want Philip to recommend to
his client? Is the company's control system designed to ensure that choice? What can the company do
implement better controls?
4. From examples stated in the case, what may head-office measure in order to access performance?
5. Name another industry/situation where this may occur.
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