Last Year's Return on Equity Was 30 Percent, and While

question 62

Multiple Choice

Last year's return on equity was 30 percent, and while the same amount of earnings was generated this year, the ROE has decreased to 20 percent.The firm has no preferred stock.What caused the decrease?

• A)Equity decreased by 10 percent
• B)Equity decreased by 50 percent
• C)Equity increased by 10 percent
• D)Equity increased by 50 percent

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Definitions:

Standard Deviation

A statistical measure of the dispersion or spread in a set of data, indicating how much variation exists from the average.

Index Fund

A type of mutual fund or exchange-traded fund (ETF) designed to replicate the performance of a specific benchmark index.

PHStat

A software program that enhances Microsoft Excel with the capability to perform statistical analysis.

Variance

A measure of the dispersion of a set of data points around their mean, indicating how spread out the data points are.