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stable dividend growth rate

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The "teacher" in this course thinks that by reading a module, that somehow I'll understand the logic to these questions. I have some of the formulas figured out, but I'm lost as to why I'm not getting the any of the options as answers.

ABC Co. pays out 60% of its earnings as dividends. Its return on equity is 15%. What is the stable dividend growth rate for the firm?

A. 9%
B. 5%
C. 6%
D. 15%

A bond is listed in The Wall Street Journal as a 12 3/4s of July 2009. This bonds pays:

A. $127.50 in July and January.
B. $63.75 in July and January.
C. $127.50 in July.
D. $63.75 in July.
E. None of the above.

A bond with a 7% coupon that pays interest semi-annually and is priced at par will have a market price of _____ and interest payments in the amount of _____ each.

A. $1,007; $70
B. $1,070; $35
C. $1,070; $70
D. $1,000; $35
E. $1,000; $70

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Solution Preview

ABC Co. pays out 60% of its earnings as dividends. Its return on equity is 15%. What is the stable dividend growth rate for the firm?

A. 9%
B. 5%
C. 6%
D. 15%
g=b*ROE
b=1-Dividend payout ...

Solution Summary

Bonds & Growth Rates are investigated.

$2.19
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