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Basic Question 1 of 6

According to the dividend discount model the value of a stock is the ______.

A. present value of an expected stream of future dividends.
B. future value of an expected stream of future dividends.
C. sum of all future dividends.

User Contributed Comments 4

User Comment
chamad I don't see the difference between A & C! can someone explain...thanks
VenkatB The sum of all (Present Value of) future dividends

C is missing the "present value" aspect
Oarona well explained VenkatB
johntan1979 Just recall the formula:

Is V = sum of all future dividends, i.e. D1, D2, D3...?

Nope, it's D/r-g
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I am happy to say that I passed! Your study notes certainly helped prepare me for what was the most difficult exam I had ever taken.
Andrea Schildbach

Andrea Schildbach

Learning Outcome Statements

calculate and interpret the present value(PV) of fixed-income and equity instruments based on expected future cash flows

calculate and interpret the implied return of fixed-income instruments and required return and implied growth of equity instruments given the present value (PV) and cash flows

CFA® 2024 Level I Curriculum, Volume 1, Module 2.