Eduardo Was a Licensed Stock Broker in the State of New

question 82

Multiple Choice

Eduardo was a licensed stock broker in the state of New York.Two years ago,he suggested to his client James that he invest his entire Individual Retirement Rollover account valued at $800,000 into the stock of a high technology company with strong growth potential.After the trade was conducted,James became the owner of several thousand shares.However,the company faltered during a deep recession,and the value of James's holdings decreased to less than ¼ of the purchase value.He decided to sue Eduardo for providing what he considered to be bad advice,and won a hefty sum of money.Eduardo lost his job with a major financial services company,and eventually lost his license to sell investments.Eduardo may have benefited from ___________________.

• A)better employer.
• B)product liability insurance.
• C)professional liability insurance.
• D)agreeing to pay James the commission he received from the original sale.

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Definitions:

NPV Calculation

Net Present Value Calculation; a method used to evaluate the profitability of an investment by comparing its present value of cash inflows and outflows over time.

Similar Investment

An investment in assets or projects that have similar risk levels, expected returns, or financial profiles.

Interest Rate

The cost, in the form of a percentage of the principal amount, charged by a lender to a borrower for accessing funds or assets.

Profit Stream

Future flow of profits from an investment over time.