Foundations of Finance, Student Value Edition Plus MyLab Finance with Pearson eText  - Access Card Package (9th Edition)
Foundations of Finance, Student Value Edition Plus MyLab Finance with Pearson eText - Access Card Package (9th Edition)
9th Edition
ISBN: 9780134426815
Author: Arthur J. Keown, John D. Martin, J. William Petty
Publisher: PEARSON
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Chapter 13, Problem 1RQ

What is meant by the term dividend payout ratio?

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Summary Introduction

To discuss: Meaning of dividend pay-out ratio.

Explanation of Solution

Dividend pay-out ratio shows that the amount paid in the form of dividends relative to the earnings that are available for common stockholders. In other words, it is nothing but, dividend per share divided by earnings per share.

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National Bank currently has $500 million in transaction deposits on its balance sheet. The current reserve requirement is 10 percent, but the Federal Reserve is decreasing this requirement to 8 percent. Show the balance sheet of the Federal Reserve and National Bank if National Bank converts all excess reserves to loans, but borrowers return only 50 percent of these funds to National Bank as transaction deposits. Show the balance sheet of the Federal Reserve and National Bank if National Bank converts 75 percent of its excess reserves to loans and borrowers return 60 percent of these funds to National Bank as transaction deposits.
The FOMC has instructed the FRBNY Trading Desk to purchase $500 million in U.S. Treasury securities. The Federal Reserve has currently set the reserve requirement at 5 percent of transaction deposits. Assume U.S. banks withdraw all excess reserves and give out loans. What is the full effect of this purchase on bank deposits and the money supply if borrowers return only 95 percent of these funds to their banks in the form of transaction deposits?
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Financial ratio analysis; Author: The Finance Storyteller;https://www.youtube.com/watch?v=MTq7HuvoGck;License: Standard Youtube License