Problem:
O'Neal transformed Merrill Lynch from a conservative bank into an aggressive risk-taking institution. Risk-taking means that there is the potential for high rewards as well as large losses. From 2002, when O'Neal became CEO, Mer-rill's share rose 53 percent.
Required:
Question: Should the investors now be upset that, as a result of the subprime mortgage meltdown, Merrill's stock price fell by about 30 per-cent in 2007?
Note: Show all workings.