Which of the Following Statements Is Correct Concerning the Sustainable

question 56

Multiple Choice

Which of the following statements is correct concerning the sustainable growth rate?

• A) It increases as ROE decreases.
• B) It increases as the payout ratio decreases.
• C) It is maximized when the plowback ratio equals zero.
• D) It is always less than the internal growth rate.

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Definitions:

Coupon Rate

The coupon rate is the annual interest rate paid on a bond, expressed as a percentage of the face value.

Yield To Maturity

The total return anticipated on a bond if the bond is held until its maturity date, factoring in its current market price, par value, interest payments, and time to maturity.

Current Yield

The yearly earnings from interest or dividends, when divided by the security's current market price.

Capital Gains Yield

Results from changing prices and is calculated as (P1 - P0)/P0, where P0 is the beginning-of-period price and P1 is the end-of-period price.