Students are to choose one of these Ethics Cases from the following chapters: 3-
ID: 2576188 • Letter: S
Question
Students are to choose one of these Ethics Cases from the following chapters: 3-16, 5-4, 6-1, or 7-5. These Ethics Cases are found in the Broaden Your Perspective section at the end of each chapter. You do not need to answer the problems questions, just use the situation to develop your ethics case summary.
For this report, students are to summarize the ethical issue at hand using their own words and list at least 5 of the stakeholders affected. They then must list at least 5 creative alternatives to the ethical issue, choose one alternative, and give an explanation why you chose that specific alternative over the others. Please support your decision with information from your textbook.
Papers need to be 1-2 pages
Ethics Case 6-1 Rate of return LO6-10 The Damon Investment Company manages a mutual fund composed mostly of speculative stocks. You recently saw an ad claiming that investments in the funds have been earning a rate of return of 21%. This rate seemed quite high so you called a friend who works for one of Damon's competitors. The friend told you that the 21% return figure was determined by dividing the two-year appreciation on investments in the fund by the average investment. In other words, $100 invested in the fund two years ago would have grown to $121 ($21 ÷ $100 = 21%). Required: Discuss the ethics of the 21% return claim made by the Damon Investment Company.Explanation / Answer
Ethically, the Damon Investment Company should not claim a 21% return on fund invested because
1) The mutual fund is dependent on the Share market, so any confirmed claim towards the return can not be made.
2) The past NAV of the fund could not be taken as return on the fund because NAV is dependent quatation raised by the prospective investors if there is no investors than the NAV would not exist.
3) Moreover, claiming the return on the basis of two years appeciation on investments could not be ethically accepted as the period is too small.
4) The return on the speculative stocks could not be determined as much high beta prevails in the stock.
Thus, being managing a highly speculative stocks mutual fund, the Damon Investment Company cannot claim a confirm 21% return on the fund ethically.
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