Domino Grace is a financial services company. It has started using scientific principles of management to analyze the compensation system for its financial advisors. Under the current system, revenue goals are based on the financial advisors' performances in the previous year. Domino Grace managers believe that the financial advisors could generate much more revenue if they were encouraged to offer derivatives, a complex but potentially profitable investment product. Which of the following, if true, would weaken the argument of Domino Grace's management?
A) Competitors of Domino Grace have lured new customers by offering access to exotic new investment options.
B) A new political administration is expected to pass new financial regulations affecting derivative investments.
C) Derivative investments are similar to most investments in that when a trade is made, a gain on one side is mirrored by a loss on the other.
D) Many of the investors who are interested in derivative investments are also interested in traditional investments.
E) The opinions of Domino Grace stockholders are representative of the opinions of the investment community in general.

Question

Quizplus · Accepted Answer

The argument of Domino Grace's management is weakened by the possibility of new financial regulations affecting derivative investments (choice B), as this could introduce uncertainty or restrictions that might limit the potential profitability or feasibility of offering derivatives, contrary to the management's belief that encouraging derivatives would significantly increase revenue.

Domino Grace Is a Financial Services Company