- CFA Exams
- CFA Level I Exam
- Study Session 13. Equity Investments (2)
- Reading 41. Equity Valuation: Concepts and Basic Tools
- Subject 2. Present Value Models: The Dividend Discount Model

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**CFA Practice Question**

Which of the following assumptions does the Gordon growth dividend discount model require?

II. The dividend growth rate continues indefinitely.

III. The required rate of return is less than the dividend growth rate.

I. Dividends grow at a constant rate.

II. The dividend growth rate continues indefinitely.

III. The required rate of return is less than the dividend growth rate.

A. I only

B. I and II only

C. I, II and III

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**User Contributed Comments**
2

User |
Comment |
---|---|

chuong |
Required rate of return must be higher than growth rate. |

kingirm |
There is no requirement for growth rate to be constant. |