Relationship between the interest rate for bond and price

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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?

Reference no: EM131984781

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