Steve Is Deep in Debt Due to a Gambling Problem

question 6

Multiple Choice

Steve is deep in debt due to a gambling problem. He is the bookkeeper for a family-owned business, Cal Poly Greenery. The company has only three employees - Steve, the husband, and the wife. All three have been friends for many years. One day the loan shark who lent Steve $20,000 comes knocking at his door asking for repayment of the loan. Steve convinces the loan shark to give him another day. The following day Steve writes a check on the company's books to himself for $20,000. Since he reconciles the bank accounts and prepares the financial statements, Steve knows it's unlikely the owners will ever know about what he has done. From an ethical perspective, Steve has:

• A) Violated the trust placed in him by the owners
• B) Risked his reputation if the loan shark finds out
• C) Risked his ability to continue working for Cal Poly Greenery
• D) All of the above

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Definitions:

Market Risk

The risk of losses in positions arising from movements in market prices.

Portfolio Risk

The risk associated with holding a portfolio of investments, reflecting the volatility of returns and potential for loss.

Stock Volatilities

The degree of variation of a trading price series over time, often used to gauge the risk of a security.

Negative Correlation

A relationship between two variables where one variable increases as the other decreases, and vice versa.