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An Investment Consultant Is Recommending a Certain Class of Mutual

question 157

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An investment consultant is recommending a certain class of mutual funds to clients based on its exceptionally high probability of gain. It is an ethical practice to explain to clients what the basis of her probability estimate is.


Definitions:

Credit Sale

A transaction where the buyer is allowed to pay for goods or services at a later date, as opposed to paying at the time of sale.

Monthly Interest Rate

The interest rate applied to a loan or investment, calculated to reflect the monthly compounding period.

Variable Cost

Costs that vary directly with the level of production or sales, such as materials and labor.

Sales Price

The amount of money a buyer pays to purchase a good or service from a seller.

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