a) A new investor lined up at the Dyer and Blair Investment counter to buy his first set of securities ever in his life. While at the queue, he overheard a conversation from some people, also in the queue, regarding the shares of Glovu ltd that he hadnt considered buying. One of the men retorted, This Glovu ltd just made a share repurchase and I think I should increase my holding therein as the prices are going to increase in a short while. His colleague nodded in approval and retorted that he didnt have any current holdings in that counter, but he too was going to seek margin purchases of that security to make a profit on the obvious upside.

This conversation created a great deal of anxiety and confusion to the new investor and for some time, he contemplated changing his mind on the choice of securities.

Required:

Tender a well-reasoned case highlighting the best course of action available to this new investor. If possible anchor your response on appropriate theory with practical but hypothetical examples. (10 Marks)

b) The overparameterization in financial options renders the models useless in dealing with Real Options Analysis where flexibility is a prerequisite. Discuss the validity or otherwise of the above assertion