Question

You are Stephen, an investment banker at Goldmen, Inc.. You work long hours but make $2 - $3 million a year. That does not include your annual bonus, a percentage of the money you bring into the company. Last year your bonus was $17 million. The year before it was $22 million. You enjoy your lifestyle: the private jet, the beautiful women/men, the finest vacations. Now you’ve met the love of your life, Jackie Onassis. You thought you were rich! Jackie is rich beyond your wildest imagination and you are having a hard time keeping up. You need more money, quickly. How do you do it? Nothing illegal. You create a new investment product for all your wealthy clients: bundled bonds issued by American cities, the backbone of the USA. People are happy to invest in the country and your product “flies off the shelves” and you are making a ton of $$. But you want a sure thing. What if the bonds fail? To protect yourself from that, you “short” the bonds, meaning you bet against their success. If they fail, you win. Now you’ve protected yourself if the investments succeed and if they fail. And the best part it, even if Goldmen were to lose money, the US government will bail the company out because it is “too big to fail.”

What would you do? Consider all options (pros and cons) and explain your reasoning.

(This professor is a feisty one, so I need a really good answer)

Answer 1

Making sure our earnings are permanent and does not stop if any issue arises is a good idea but the want for more money might make us go in the wrong path. In order to reach the expectations of our highly rich partner we cannot put ourselves at stake. We need to give importance to the work we do and earnings would definately come our way. In desparation to do something big , we must not do something risky which might keep our whole earnings till not at risk . So we need keep up the efforts and always try to give our best but in a safe and planned manner.