CFA Practice Question

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CFA Practice Question

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.
Correct Answer: A

Any number of stock valuation models are based on the premise that the value of a stock lies in the present value of its future divided stream.

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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