Case study on “If two heads are better than one, are four even better” by Maggie Becker
“If two heads are better than one, are four even better”
Maggie Becker, 24, is a marketing manager for Kavu, a small chain of coffee shops in eastern Ohio. Recently,Maggie’s wealthy uncle passed away and left to Maggie, his only niece, $100000. Maggie consider her current salary to be adequate to meet her current living expenses, so she’d like to invest the money so that when she buys a house she’llhave a nice nest egg on which to draw.
One of Maggie’s neighbours, Brian, is a financial advisor. Brian told Maggie there was a virtually endless array of investment option. She asked him to present her with two of the best options, and this is what he came up with:
1. A very low risk mutual fund. With this option, based on the information Brian provided, Maggie estimates that after 5 years she stands virtually zero chance of losing money, with an expected gain of approximately $7000.
2. A moderate-risk mutual fund. Based on the information Brian provided her, Maggie estimates that with this option she stands a 50 percent chance of making a $40000 gain but also a 50 percent chance of losing $20000. Maggie prides herself on being rational and objective in her thinking. However, she’s unsure of what to do in this case. Brian refuses to help her, telling her that she’s already limited herself by asking for only two options. While driving to her parents’ house for the weekend, Maggie finds herself vacillating between the two options. Her older brother is also visiting the folks this weekend, so Maggie decides to gather her family around the table after dinner, lay out the two options, and go with their decision “You know the old saying-two heads are better than one,” she says to herself, “so four heads should be even better.”
Questions
1. Has Maggige made a good decision about the way she is going to make the decision?
2. Which investment would you choose, why?
3. Which investment do you think most people would choose?
4. Based on what
Maggie Becker, 24, is a marketing manager for Kavu, a small chain of coffee shops in eastern Ohio. Recently,Maggie’s wealthy uncle passed away and left to Maggie, his only niece, $100000. Maggie consider her current salary to be adequate to meet her current living expenses, so she’d like to invest the money so that when she buys a house she’llhave a nice nest egg on which to draw.
One of Maggie’s neighbours, Brian, is a financial advisor. Brian told Maggie there was a virtually endless array of investment option. She asked him to present her with two of the best options, and this is what he came up with:
1. A very low risk mutual fund. With this option, based on the information Brian provided, Maggie estimates that after 5 years she stands virtually zero chance of losing money, with an expected gain of approximately $7000.
2. A moderate-risk mutual fund. Based on the information Brian provided her, Maggie estimates that with this option she stands a 50 percent chance of making a $40000 gain but also a 50 percent chance of losing $20000. Maggie prides herself on being rational and objective in her thinking. However, she’s unsure of what to do in this case. Brian refuses to help her, telling her that she’s already limited herself by asking for only two options. While driving to her parents’ house for the weekend, Maggie finds herself vacillating between the two options. Her older brother is also visiting the folks this weekend, so Maggie decides to gather her family around the table after dinner, lay out the two options, and go with their decision “You know the old saying-two heads are better than one,” she says to herself, “so four heads should be even better.”
Questions
1. Has Maggige made a good decision about the way she is going to make the decision?
2. Which investment would you choose, why?
3. Which investment do you think most people would choose?
4. Based on what