Terry Zupita is considering how to invest the modest amount ofmoney she recently inherited ($48,000). Based on her knowledge ofdifferent types of investments, as well as the advice of friends,Terry thinks that she should invest her inheritance in a long-termU.S. Treasury bond that promises to pay her $3,690 interest every 6months for 10 years. However, today at lunch, Terry asked her bestfriend Mike how he would invest the money. Mike responded that hethought she could invest in something other than the T-bond andearn a much higher rate of return. In fact, he told Terry that hewas at a company social a few nights ago where he overheard a fewpeople talking about a U.S. automobile manufacturer that ispartnering with the Chinese government to open a manufacturingoperation in Shanghai. The firm, named Universal Autos (UA), wouldhave exclusive rights to manufacture U.S. automobiles in China. Oneof the men involved in the conversation stated that he thought thearrangement presented a huge opportunity for UA to substantiallyincrease its profits during the next 10 years, which shouldtranslate into significant increases in the companyâs stock price.All of the other people involved in the discussion agreed.Intrigued, Terry thought it would be a good idea to investigate UAas a potential investment, so she sought advice from her friendsand relatives. One friend advised against UA as an investmentbecause she had heard from another friend that the company does notadhere to the same labor practices as companies do in the UnitedStates. Another friend advised against the investment becauseworkers have no union representation, like those who work forautomobile manufacturers in other countries. And, Terryâs uncle,who works in the U.S. State Department, said that he had heard thatUA made a huge payment, which he called a bribe, to the Chinesegovernment before the deal was signed. Her uncle thought that thepayment UA made to the government might be considered illegal inthe United States. However, Terryâs boyfriend, who happens to beChinese, thinks that she should invest her money in UA. Accordingto information provided by his family and friends in China, theagreement between UA and china represents a historic business dealthat the Chinese government intends to support fully, so there islittle risk associated with the investment. In fact, according toher boyfriend, Terryâs $48,000 could grow to $112,500 in 10 yearsif she invests it in UA. If you were Terry, what would you do?Should you invest in a company that might have questionable laborpractices or pay bribes to foreign governments?
Terry Zupita is considering how to invest the modest amount ofmoney she recently inherited ($48,000). Based on her knowledge ofdifferent types of investments, as well as the advice of friends,Terry thinks that she should invest her inheritance in a long-termU.S. Treasury bond that promises to pay her $3,690 interest every 6months for 10 years. However, today at lunch, Terry asked her bestfriend Mike how he would invest the money. Mike responded that hethought she could invest in something other than the T-bond andearn a much higher rate of return. In fact, he told Terry that hewas at a company social a few nights ago where he overheard a fewpeople talking about a U.S. automobile manufacturer that ispartnering with the Chinese government to open a manufacturingoperation in Shanghai. The firm, named Universal Autos (UA), wouldhave exclusive rights to manufacture U.S. automobiles in China. Oneof the men involved in the conversation stated that he thought thearrangement presented a huge opportunity for UA to substantiallyincrease its profits during the next 10 years, which shouldtranslate into significant increases in the companyâs stock price.All of the other people involved in the discussion agreed.Intrigued, Terry thought it would be a good idea to investigate UAas a potential investment, so she sought advice from her friendsand relatives. One friend advised against UA as an investmentbecause she had heard from another friend that the company does notadhere to the same labor practices as companies do in the UnitedStates. Another friend advised against the investment becauseworkers have no union representation, like those who work forautomobile manufacturers in other countries. And, Terryâs uncle,who works in the U.S. State Department, said that he had heard thatUA made a huge payment, which he called a bribe, to the Chinesegovernment before the deal was signed. Her uncle thought that thepayment UA made to the government might be considered illegal inthe United States. However, Terryâs boyfriend, who happens to beChinese, thinks that she should invest her money in UA. Accordingto information provided by his family and friends in China, theagreement between UA and china represents a historic business dealthat the Chinese government intends to support fully, so there islittle risk associated with the investment. In fact, according toher boyfriend, Terryâs $48,000 could grow to $112,500 in 10 yearsif she invests it in UA. If you were Terry, what would you do?Should you invest in a company that might have questionable laborpractices or pay bribes to foreign governments?
