Give an example of a company whose diversification strategy was unsuccessful. Briefly describe why it failed and what lessons can be learned from its failure?

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Nestor RutherfordLv2

28 Aug 2019

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One of the basic principles of finance is that all risk is not equal since some risk can be diversified away and some cannot. The process of diversification can reduce risk, and as a result, measuring a project's or an asset's risk is very difficult. Research and discuss the topic of diversification.

What is diversification? Give some examples. Does this impact the financial management of an organization? If so, how? If not, why not? Do organizations embrace diversification as a guideline? If so, how? If not, why not.

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I was told to do this assignment and its about 3-4 pages paper about Dave Ramsey book "Complete Guide to Money."

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below is the instruction of the assignment:

Consumer Law Assignment Your assignment for the Dave Ramsey book "Complete Guide to Money" is to write a 3-4 page paper outlining the consumer finance lessons that you found most helpful or relevant, and to explain how you might incorporate the author's advice into how you handle your finances (personal, school, etc.) going forward. Tell me what you learned from the book that was most useful to you

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1. The Bank of America faces a investor who would like to borrow $10,000 for a project. If this is a good project, it has 4/5 chance of being succeed which lead to a return of $20,000 and 1/5 chance of being failed which lead to a return of $5,000. On the other hand if this is a bad project, it has 1/5 chance of being succeed which lead to a return of $85,000 and 4/5 chance of being failed which lead to a return of $0.
(1) If the bank can distinguish the two kinds of project, what is the minimal required repayment for each of the project? Hint: a failure of the project may lead to a default.
(2) Now that the bank can not distinguish the two kinds of project and only knows that they will appear with equal chance. If the bank can not apply the collateral strategy, can the market not fail? Hint: the market fails as long as good projects can not be funded.
(3) What if the bank can collect collaterals? What is the minimal required collateral given the bank still can not distinguish projects?

carminebuffalo606

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