Discuss the Sherman Act.
A retired football player has decided to establish a wealth management company, WealthCo. The target market is young people who have been in employment for less than 15 years. Investors' funds will be sourced through an online platform. (i) List eight items of information in respect of individual investors which should be collected through the online platform. [4] (ii) List four items of information which WealthCo should provide investors with before investments are made. [2] (iii) (a) Describe, with examples, the elements which contribute to an investor's net worth. (b) Discuss, with reference to WealthCo's target market, the relationship between net worth and risk tolerance. [12] In order to determine an appropriate investment portfolio recommendation for clients, WealthCo will first determine each client's risk tolerance. (iv) Outline the key considerations when determining a client's risk tolerance and choice of suitable investment portfolios. [4] WealthCo's marketing manager has proposed that clients should be split into two risk tolerance categories with each client's risk tolerance category determined using software purchased from an external provider. Investment portfolios will then be chosen from those currently available from a specialist asset manager. (v) Suggest reasons why the manager's proposal may NOT be appropriate for the target market. [7]An alternative proposal is to split clients into multiple (more than two) risk tolerance categories, each defined by a target portfolio volatility. Each category will have an associated strategic asset allocation (SAA) which will be used to select and review the performance of the funds recommended to clients. (vi) Explain how the strategic asset allocations (SAAs) for each of the risk tolerance categories could be determined. [10] (vii) Describe how the SAAs could be used for benchmarking purposes. [1] A senior portfolio manager is proposing that these portfolios can be passively managed, with the asset allocation re-aligned with the SAA annually. He has stated that this is the only management style suitable for the target market and that the relatively low charges will be attractive. (viii) Comment on the senior portfolio manager's proposal. [3](i) State the main features of exchange traded and over-the-counter (OTC) derivatives contracts. [4] A bank, with limited experience of derivatives trading, is considering offering its customers a facility to trade derivatives. The bank is concerned about the potential losses in the event of a customer defaulting on an exchange-traded derivative contract. (ii) Explain how the system of margins protects the bank and the wider market from suffering such losses. [5] The bank is particularly concerned about potential large losses suffered from customer default if markets move significantly. In order to manage customer expectations, the bank is producing a document for its customers to explain the benefits and risks of portfolio hedging using options. The bank proposes to include the following strategies in the document about hedging portfolio risk: a protective put (a long position in a put option added to a long position in an asset) a covered long call (a short position in a call option added to a long position in an asset) a straddle (buying a call and a put with the same strike price and expiration date based on the same underlying asset). (iii) Discuss whether each of these option strategies can be used to hedge portfolio risk. [6]Discuss at least three types of market structures Discuss the various measures of market power. Give examples of countries that would be classified as a monopoly. What about an oligopoly. What about monopolistic competition. Discuss the measures implemented by the government to deal with firms that abuse their market power. Discuss why some degree of monopoly power is permitted in an economy? What influence do consumers have on market structures? What influence do the producers have? What is the process used to solve a Cournot homogenous duopoly
