- CFA Exams
- CFA Level I Exam
- Topic 5. Equity Investments
- Learning Module 8. Equity Valuation: Concepts and Basic Tools
- Subject 3. Present Value Models: The Dividend Discount Model
CFA Practice Question
In the dividend discount model, a factor not affecting the discount rate (k) is the ______.
B. risk premium for stocks
C. return on assets
D. expected inflation rate
A. real risk-free rate
B. risk premium for stocks
C. return on assets
D. expected inflation rate
Correct Answer: C
User Contributed Comments 6
| User | Comment |
|---|---|
| danlan | Why C? |
| wroger | Return on assets has nothing to do with discount rate. |
| anricus | Cost of Equity is made up of risk free rate + nominal rate of return. (1+Nominal rate)=(1+real rate)*(1+inflation rate) and Cost of Equity (Ke) = rf + premium |
| sam95 | Because A,B and D are directly related in determining K where as C is not a part of K. |
| zeiad | key => not |
| jonan203 | C relates to financial statement analysis |