Consider the Following Average Annual Returns: What Is the Excess

question 89

Multiple Choice

Consider the following average annual returns: What is the excess return for corporate bonds?

• A) 2.6%
• B) 1.3%
• C) 5.2%
• D) 0%

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Definitions:

Sustainable Growth Rate

The rate at which a company can grow its sales, earnings, and dividends without borrowing new funds.

Debt-equity Ratio

A gauge of a company's use of borrowing relative to the equity provided by its shareholders, determined by dividing liabilities by shareholders' equity.

Plowback Ratio

The proportion of earnings that a company reinvests in its business rather than distributing to shareholders.