What Is the Return on Equity for a Firm That

question 95

Multiple Choice

What is the return on equity for a firm that has a constant dividend growth rate of 7 percent and a dividend payout ratio of 60 percent?

• A)2.80 percent
• B)4.20 percent
• C)11.67 percent
• D)17.50 percent

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Definitions:

Slope of the Budget Line

The rate at which one good can be traded for another, reflecting the relative prices of two goods.

Standard Deviation

An indicator that calculates how much a group of figures deviates or scatters from each other.

Risky Asset

An asset that carries a significant degree of risk of losing value, but also offers the potential for higher returns as compared to safer investments.

Rate of Return

The increase or decrease in the value of an investment during a set timeframe, represented as a percentage of the investment's starting price.