Fin-571 Discussion Questions

Week One

Discussion Question No. 3

This week we are learning about the Principle of Self-Interested Behavior. Does this principle conflict with ethical behavior? Why or why not?

Response: This week’s readings bring out financial management is built upon the principles of finance. One principle of finance dealing with the competitive economic environment is the Principle of Self-Interested Behavior. This principle implies that people will act in their own financial self-interest, meaning human nature will cause an individual to make business decisions based upon what is most economically beneficial for them.

This principle does not have to interfere with ethical behavior for the reason that for every financial transaction, there are parties involved. And for every sale, there is a purchase. No doubt every seller wants to get the highest price. Likewise, every purchaser wants to pay the lowest price.

It’s important to understand how humans think in this regard because in the competitive environment, every potential action taken will eliminate other possible actions raising potential opportunity costs. Therefore, it only makes sense that all parties involved in financial transactions to base their business decisions on getting the most good of resources for which will benefit them the most.

The way I incorporate this principle in my work environment is when dealing with customers, I lay everything on the line. I collect as much data from the customer I can to understand what they need, want, and can afford. I already know what I want, which is to make as much money as possible. However, I take the information from the customer and make suggestions for which will satisfy every party, both tangibly and non-tangibly. It’s a win-win for everyone and I never feel badly thinking my decisions were non-ethical.

Discussion Question No. 4

Assume that interest rates have increased substantially. Would this tend to increase or decrease the market value...