1. What is Dupont identity and how can financial manager use it?
If share price falls from $15 to $12 per share, and pays a dividend of $1 per share, what was the rate of return to shareholders?
2. You are offered a bet. You will pay $10,000 to make this bet. There is a 25% chance of a $0 payoff, a 50% chance of a $9,200 payoff and a 25% chance of a $21,600 payoff. The payoff occurs immediately after taking the bet. You take the bet. Are you a risk-neutral investor? Why or why not?
3. Explain why there is an inverse relationship between the interest rate for a bond and its price (i.e. when one goes down, the other goes up-why?