1. Briefly outline the implications for managers --- under which conditions should a firm issue debt?
2. What do profitability ratios indicate? Identify some measures of profitability.
3. The risk-free rate is 2.2% and the expected market return is 5.5%. A risky stock has a beta of 2.02. If CAPM holds, what are the Treynor indexes of the market and the risky stock?
The? market's Treynor Index is ____%.
The? stock's Treynor Index is ____%.