question archive Serge Koros, a high net worth individual, is approached one day at his country club by Lenny Waldorf, hedge fund manager
Serge Koros, a high net worth individual, is approached one day at his country club by Lenny Waldorf, hedge fund manager
Subject:EconomicsPrice: Bought3
Serge Koros, a high net worth individual, is approached one day at his country club by Lenny Waldorf, hedge fund manager. After introducing himself, Lenny tells Serge that he would be willing to manage some of Serge’s wealth in exchange for a fixed fee of $1,000,000. Which of the following strategies is likely to have the biggest impact in mitigating moral hazard and improving Lenny’s management of Serge’s wealth?
(a) Serge offers to pay Lenny a lower fee of $500,000.
(b) Serge offers to pay Lenny a higher fee of $2,000,000.
(c) Instead of a fixed fee, Serge offers to pay Lenny 20% of the profits that Lenny generates from managing his wealth.
(d) Serge offers to pay Lenny a fixed fee equal to 5% of the wealth he entrusts Lenny to manage.
(e) Serge refuses Lenny’s offer and asks him for stock tips instead.
