Gagliardi Way Corporation Has an Expected ROE of 15

question 32

Multiple Choice

Gagliardi Way Corporation has an expected ROE of 15%. If it pays out 30% of its earnings as dividends, its dividend growth rate will be ________.

• A) 4.5%
• B) 10.5%
• C) 15%
• D) 30%

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Definitions:

Compounded Semi-Annually

Interest calculation method where the interest is added to the principal sum twice a year, causing the interest to earn interest.

Strip Bond

A type of bond where the principal and regular coupon payments have been separated and are sold individually as zero-coupon bonds.

Interest

The cost of borrowing money, typically expressed as a percentage of the borrowed amount, paid by the borrower to the lender.

Effective Rate

The actual interest rate of an investment or loan when the compounding frequency is accounted for, giving a true reflection of the cost or yield.