CFA Practice Question

There are 201 practice questions for this study session.

CFA Practice Question

The ROE of a firm in 2011 was 20%. The beginning book value per share was $20. Its cost of equity is 15%. Calculate residual income.
A. $1
B. $0
C. -$1
Explanation: RI = (ROE1 - r) x B0 = (0.2 - 0.15) x $20 = $1.

User Contributed Comments 1

User Comment
dimanyc Since ROE>r, RI has got to be positive. Hence, A.
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