Pelican Point Financial Group's clientele consists of two types of investors. The first type of inves makes many transactions in a given year and has a net worth of over $2.5 million. These investo seek unlimited access to investment consultants and are willing to pay up to $10,000 annually fo fee-based transactions, or alternatively, $20 per trade. The other type of investor also has a net of over $2.5 million but makes few transactions each year and therefore is willing to pay $65 pe trade. As the manager of Pelican Point Financial Group, you are unable to determine whether any give individual is a high- or low-volume transaction investor. To deal with this issue, you design a self- selection mechanism that permits you to identify each type of investor. You offer two types of pl for customers with more than $2.5 million in assets: one plan has an annual maintenance fee bu offers a large number of "free" transactions (call this the "Free Trade" Account); the other plan ha annual maintenance fee but charges for each transaction (call this the "Free Service" Account). Determine the specifics for each plan as listed below: "Free Trade" Account: Annual maintenance fee: $ Number of "free" transactions: Price for each transaction in excess of the number of "free" transactions:$ "Free Service" Account: Price per transaction: $
Pelican Point Financial Group's clientele consists of two types of investors. The first type of inves makes many transactions in a given year and has a net worth of over $2.5 million. These investo seek unlimited access to investment consultants and are willing to pay up to $10,000 annually fo fee-based transactions, or alternatively, $20 per trade. The other type of investor also has a net of over $2.5 million but makes few transactions each year and therefore is willing to pay $65 pe trade. As the manager of Pelican Point Financial Group, you are unable to determine whether any give individual is a high- or low-volume transaction investor. To deal with this issue, you design a self- selection mechanism that permits you to identify each type of investor. You offer two types of pl for customers with more than $2.5 million in assets: one plan has an annual maintenance fee bu offers a large number of "free" transactions (call this the "Free Trade" Account); the other plan ha annual maintenance fee but charges for each transaction (call this the "Free Service" Account). Determine the specifics for each plan as listed below: "Free Trade" Account: Annual maintenance fee: $ Number of "free" transactions: Price for each transaction in excess of the number of "free" transactions:$ "Free Service" Account: Price per transaction: $
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter5: Investment Decisions: Look Ahead And Reason Back
Section: Chapter Questions
Problem 2MC
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